EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
By and Among
PRICE ENTERPRISES, INC.
and
WARBURG, XXXXXX EQUITY PARTNERS, L.P.,
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS II, C.V.,
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS III, C.V.
Dated as of March 21, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS...............................................................................5
Section 1.1. Definitions.............................................................................5
ARTICLE II. PURCHASE OF COMPANY PREFERRED SHARES; CLOSING ..........................................11
Section 2.1. Authorization of Securities............................................................11
Section 2.2. Securities Purchase....................................................................11
Section 2.3. Additional Agreements and Closing Deliveries...........................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....... .................................12
Section 3.1. Existence; Good Standing; Authority; Compliance with Law...............................12
Section 3.2. Authority Relative to Agreements; Approvals............................................13
Section 3.3. Capitalization.........................................................................14
Section 3.4. Subsidiaries...........................................................................15
Section 3.5. Other Interests........................................................................15
Section 3.6. No Conflicts; No Defaults; Required Filings and Consents...............................15
Section 3.7. SEC Documents..........................................................................16
Section 3.8. Litigation.............................................................................17
Section 3.9. Absence of Certain Changes.............................................................17
Section 3.10. Undisclosed Liabilities...............................................................18
Section 3.11. Taxes.................................................................................18
Section 3.12. Books and Records.....................................................................20
Section 3.13. Properties............................................................................20
Section 3.14. Environmental Matters.................................................................25
Section 3.15. Employee Benefit Plans................................................................27
Section 3.16. Employee and Labor Matters............................................................28
Section 3.17. Insurance.............................................................................29
Section 3.18. No Brokers............................................................................29
Section 3.19. Proxy Statement and Other Information.................................................30
Section 3.20. Vote Required.........................................................................30
Section 3.21. Opinion of Financial Advisor..........................................................30
Section 3.22. Related Party Transactions............................................................30
Section 3.23. Contracts and Commitments.............................................................31
Section 3.24. Maryland Takeover Law.................................................................31
Section 3.25. Intellectual Property.................................................................31
Section 3.26. Investment Company....................................................................33
Section 3.27. Full Disclosure.......................................................................33
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER ...............................................33
Section 4.1. Organization..........................................................................33
Section 4.2. Due Authorization.....................................................................33
Section 4.3. Conflicting Agreements and Other Matters..............................................33
Section 4.4. Acquisition for Investment; Sophistication............................................34
Section 4.5. REIT Qualification Matters............................................................34
Section 4.6. Access to Information.................................................................34
Section 4.7. Accuracy of Information...............................................................35
ARTICLE V. COVENANTS RELATING TO CLOSINGS.........................................................35
Section 5.1. Taking of Necessary Action............................................................35
Section 5.2. Public Announcements..................................................................36
Section 5.3. No Solicitation of Transactions.......................................................36
Section 5.4. Notice of Breaches....................................................................38
Section 5.5. Access to Information.................................................................38
Section 5.6. Regulatory and Other Approvals........................................................38
Section 5.7. Conduct of Business by the Company Prior to Closing...................................39
Section 5.8. Environmental Assessments.............................................................42
Section 5.9. Fulfillment of Conditions.............................................................42
Section 5.10. Confidentiality.......................................................................42
ARTICLE VI. CERTAIN ADDITIONAL COVENANTS ..........................................................42
Section 6.1. Resale................................................................................42
Section 6.2. REIT Status...........................................................................43
Section 6.3. Financial and Business Information....................................................43
Section 6.4. Board Committees; Expenses............................................................43
Section 6.5. Terms of Exchange Offer...............................................................43
Section 6.6. Agreement to Vote Shares..............................................................43
Section 6.7. REIT Certification....................................................................43
Section 6.8. Additional Shares.....................................................................44
ARTICLE VII. CONDITIONS TO CLOSING ................................................................44
Section 7.1. Conditions of Purchase................................................................44
Section 7.2. Conditions of Sale....................................................................46
ARTICLE VIII. SURVIVAL; INDEMNIFICATION ...........................................................47
Section 8.1. Survival of Representations and Warranties............................................47
Section 8.2. Indemnification by the Company........................................................47
Section 8.3. Indemnification by Buyer..............................................................48
Section 8.4. Damages Threshold.....................................................................48
Section 8.5. Third-Party Claims....................................................................48
Section 8.6. REIT Indemnification..................................................................49
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ARTICLE IX. TERMINATION 49
Section 9.1. Termination...........................................................................49
Section 9.2. Procedure and Effect of Termination...................................................50
Section 9.3. Expenses and Taxes....................................................................51
ARTICLE X. MISCELLANEOUS...........................................................................52
Section 10.1. Counterparts.........................................................................52
Section 10.2. Governing Law........................................................................52
Section 10.3. Entire Agreement.....................................................................52
Section 10.4. Notices..............................................................................52
Section 10.5. Successors and Assigns...............................................................53
Section 10.6. Headings.............................................................................53
Section 10.7. Amendments and Waivers...............................................................53
Section 10.8. Interpretation; Absence of Presumption...............................................53
Section 10.9. Severability.........................................................................54
Section 10.10. Further Assurances..................................................................54
Section 10.11. Specific Performance................................................................54
Exhibits
Exhibit A Purchase Price
Exhibit B Price Voting Stockholders Agreement
Exhibit C Registration Rights Agreement
Exhibit D Form of Warrant
Exhibit E Resolutions of the Company
Exhibit F Form of Amended Articles of Incorporation
Exhibit G Form of REIT Representation Certificate of Buyer
SELLER DISCLOSURE LETTER
Schedule 1.1 Contemplated Transactions
Schedule 3.1 Existence; Good Standing; Authority; Compliance with Law
Schedule 3.3 Capitalization
Schedule 3.4 Subsidiaries
Schedule 3.5 Other Interests
Schedule 3.6 No Conflicts; No Defaults; Required Filings or Consents
Schedule 3.8 Litigation
Schedule 3.10 Undisclosed Liabilities
Schedule 3.11 Taxes
Schedule 3.13 Properties
Schedule 3.14 Environmental Matters
Schedule 3.15 Employee Benefit Plans
Schedule 3.15(k) Employment Related Payments
Schedule 3.17 Insurance
Schedule 3.22 Related Party Transactions
Schedule 3.23 Contracts & Commitments
Schedule 3.25 Intellectual Property
Schedule 5.7 Conduct of Business by the Company
Schedule 7(i) Non-Investor Nominee Directors
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
as of March 21, 2001, is made by and among Price Enterprises, Inc., a Maryland
corporation (the "Company"), and Warburg, Xxxxxx Equity Partners, L.P., a
Delaware limited partnership, Warburg, Xxxxxx Netherlands Equity Partners I,
C.V., a Netherlands limited partnership, Warburg, Xxxxxx Netherlands Equity
Partners II, C.V., a Netherlands limited partnership, and Warburg, Xxxxxx
Netherlands Equity Partners III, C.V., a Netherlands limited partnership (each,
a "Warburg Entity," and collectively, "Buyer").
RECITALS:
WHEREAS, the Company has entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of the date hereof, by and among Excel
Legacy Corporation ("Legacy"), the Company and PEI Merger Sub, Inc., a wholly
owned subsidiary of the Company ("Merger Sub"), to effect a merger between
Legacy and Merger Sub (the "Merger");
WHEREAS, subject to the terms and conditions hereof, the
Company desires to sell to Buyer and Buyer desires to purchase from the Company
(i) an aggregate 17,985,612 of 9% Series B Junior Convertible Redeemable
Preferred Stock, $.0001 par value per share (the "Company Series B Preferred
Shares"), and (ii) one or more warrants, each substantially in the form of
EXHIBIT D hereto, to purchase an aggregate of 2,500,000 shares of Common Stock
of the Company, $.0001 par value per share ("Company Common Shares"), in
accordance with the terms of such warrant at an exercise price of $8.25 per
share (the "Warrants");
WHEREAS, the Board of Directors (the "Board"), based on the
unanimous recommendation of a special committee of independent directors of the
Company (the "Special Committee"), has approved, and deems it advisable and in
the best interests of the stockholders of the Company to consummate, the
transactions contemplated by this Agreement, upon the terms and subject to the
conditions set forth herein;
WHEREAS, as an inducement to Buyer to enter into this
Agreement, each of the Board and certain stockholders has approved the terms of
a Voting Stockholders Agreement in the form of EXHIBIT B (the "Voting
Stockholders Agreement") to be entered into by the Company, Buyer and other
stockholders, concurrently with the execution of this Agreement pursuant to
which each of such stockholders has agreed to vote its capital stock holdings
for approval of the transactions contemplated by this Agreement; and
WHEREAS, as an inducement to Buyer to enter into this
Agreement, each of the Board and certain stockholders has approved the terms of
a Registration Rights Agreement in the form of EXHIBIT C (the "Registration
Rights Agreement") to be entered into by the Company, Buyer and other
stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:
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ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" shall mean any (a) director, officer or
stockholder holding 5% or more of the capital stock (on a fully-diluted basis)
of such person, (b) spouse, parent, sibling or descendant of such person (or a
spouse, parent, sibling or descendant of a director, officer, or partner of such
person) and (c) other person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. The term "control" includes, without limitation, the possession,
directly or indirectly, of the power to direct the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise. Any person that beneficially owns, directly or indirectly, 25% or
more of the voting securities of another person or any person that designates
one or more members of the board of directors of another person shall be deemed
to control such other person.
"Agreement" shall have the meaning set forth in the first
paragraph hereof.
"Amended Articles of Incorporation" shall have the meaning set
forth in Section 5.1(b).
"Articles of Incorporation" shall mean the Company's Articles
of Incorporation filed with the SDAT, as amended and supplemented.
"Blue Sky Laws" shall have the meaning set forth in Section
3.6(e).
"Board" shall have the meaning set forth in the recitals.
"Business Day" shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York generally are authorized or required by law or other
government actions to close.
"Buyer" shall have the meaning set forth in the first
paragraph hereof.
"Buyer Indemnified Persons" shall have the meaning set forth
in Section 8.2.
"Buyer Ownership Ratio" shall have the meaning set forth in
Section 6.8.
"Bylaws" shall have the meaning set forth in Section 3.1(f).
"CERCLIS" shall have the meaning set for the in Section
3.14(h).
"Charter Documents" shall mean the certificate or articles of
incorporation or bylaws (in the case of a corporation), trust agreement, deed or
trustees' regulations (in the case of a trust), limited liability company or
operating agreement or registration certificate (in the case of
5
a limited liability company) or agreement or certificate of partnership or joint
venture (in the case of a partnership or joint venture) or co-tenancy agreement.
"Closing" shall have the meaning set forth in Section 2.2(b).
"Closing Date" shall have the meaning set forth in Section
2.2(b).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder as in effect on the date
hereof.
"Collateral Shares" shall have the meaning set forth in
Section 6.8.
"Commitment" shall have the meaning set forth in Section 3.9.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Company Common Share" shall have the meaning set forth in the
recitals hereof.
"Company Indemnified Person" shall have the meaning set forth
in Section 8.3.
"Company Material Adverse Effect" shall have the meaning set
forth in Section 3.1(a).
"Company Preferred Shares" shall mean the Company Series A
Preferred Shares and the Company Series B Preferred Shares.
"Company Property" and "Company Properties" shall have the
respective meanings set forth in Section 3.13(a).
"Company Reports" shall have the meaning set forth in Section
3.7.
"Company Series A Preferred Shares" shall have the meaning set
forth in Section 3.3.
"Company Series B Preferred Shares" shall have the meaning set
forth in the recitals hereof.
"Company Stockholders Meeting" shall have the meaning set
forth in Section 5.1(b) hereof.
"Company Subsidiaries" shall have the meaning set forth in
Section 3.4.
"Competing Transaction" shall mean (other than the Merger or
any Contemplated Transaction) (i) any acquisition in any manner, directly or
indirectly (including through any option, right to acquire or other beneficial
ownership), of more than 25% of the equity securities, on a fully diluted basis,
of the Company by a single person or a group of related persons, or all or
substantially all of the assets of the Company, other than any of the
transactions contemplated by this Agreement or (ii) any merger, consolidation,
share exchange, recapitalization, other business
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combination, or liquidation of the Company, other than any of the transactions
contemplated by this Agreement.
"Contemplated Transactions" shall mean those certain real
estate transactions contemplated by the Company on the date hereof and disclosed
to Buyer on Schedule 1.1 of the Disclosure Letter.
"Contracts" shall have the meaning set forth in Section
3.6(d).
"Conversion Shares" shall mean the Company Common Shares
issuable upon conversion of the Company Series B Preferred Shares and upon
exercise of the Warrant.
"Damages" shall have the meaning set forth in Section 8.2.
"Disclosure Letter" shall have the meaning set forth in
Section 3.1(c).
"Encumbrance" and "Encumbrances" shall have the respective
meanings set forth in Section 3.12(i).
"Environmental Laws" shall mean any and all federal, state and
local statutes, laws (including common law), ordinances, rules, regulations,
orders, permits, judgments, and directives concerning the protection of the
environment, natural resources, human health and safety and employee health and
safety, including, without limitation, the federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended ("CERCLA"), the
federal Resource Conservation and Recovery Act, as amended, the Emergency
Planning and Community Right-to-Know Act of 1986, the Clear Water Act, the Clean
Air Act, the Safe Drinking Water Act, the Occupational Safety and Health Act and
analogous state or local laws, and the rules and regulations adopted and
promulgated pursuant to each of the foregoing Environmental Laws.
"ERISA" shall have the meaning set forth in Section 3.15(a).
"ERISA Affiliate" shall have the meaning set forth in Section
3.15(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Financial Statements" shall have the meaning set forth in
Section 3.7.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall have the meaning set forth in
Section 3.1(d).
"Ground Lease" and "Ground Leases" shall have the respective
meanings set forth in Section 3.13(a).
"Hazardous Materials" shall have the meaning set forth in
Section 3.14(d).
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"Indemnification Period" shall have the meaning set forth in
Section 8.1.
"Indemnified Party" shall mean Buyer or the Company, as the
context may require, pursuant to Article 8 hereof.
"Insured Matters" shall have the meaning set forth in Section
3.13(j).
"Intellectual Property" shall mean all of the following, owned
or used in the business of the Company or its Subsidiaries: (i) trademarks and
service marks (registered or unregistered), trade dress, product configurations,
trade names and other names and slogans embodying business or product goodwill
or indications of origin, applications or registrations in any jurisdiction
pertaining to the foregoing and goodwill associated therewith; (ii) patentable
inventions (whether patentable or unpatentable), discoveries, improvements,
ideas, know-how, formula methodology, processes, technology, computer programs
and software (including password unprotected interpretive code or source code,
object code, development documentation, programming tools, drawings,
specifications and data) and applications and patents in any jurisdiction
pertaining to the foregoing, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions; (iii) trade secrets, including
confidential and other non-public information and the right in any jurisdiction
to limit the use of disclosure thereof; (iv) copyrights in writings, designs,
software programs and software, mask works or other works, applications or
registrations in any jurisdiction for the foregoing and moral rights related
thereto; (v) databases and database rights; (vi) Internet Web sites, domain
names and applications and registrations pertaining thereto; (vii) licenses,
immunities, covenants not to xxx and the like relating to the foregoing; (viii)
books and records describing or used in connection with the foregoing; and (ix)
claims or causes of action arising out of or related to past, present or future
infringement or misappropriation of the foregoing.
"Investor Nominees" shall have the meaning set forth in
Section 7.1(i).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to the Company, the
actual knowledge of the officers of the Company, or the knowledge which an
ordinary and prudent business person employed in the same capacity in the same
type and size of business as the Company would be reasonably expected to have.
"Lease" and "Leases" shall have the respective meanings set
forth in Section 3.12(a).
"Legacy Competing Transaction" shall mean (other than the
Merger or any Contemplated Transaction) (i) any acquisition in any manner,
directly or indirectly (including through any option, right to acquire or other
beneficial ownership), of more than 25% of the equity securities, on a fully
diluted basis, of Legacy by a single person or a group of related persons, or
all or substantially all of the assets of Legacy, other than any of the
transactions contemplated by this Agreement or (ii) any merger, consolidation,
share exchange, recapitalization, other business combination, or liquidation of
Legacy, other than any of the transactions contemplated by this Agreement.
8
"Listed Intellectual Property" shall have the meaning set
forth in Section 3.25(b).
"Merger Agreement" shall have the meaning set forth in the
Recitals.
"Multiemployee Plan" shall have the meaning set forth in
Section 3.15(b).
"Nasdaq" shall mean The Nasdaq National Market.
"Options" shall have the meaning set forth in Section 3.3(f).
"Other Filings" shall have the meaning set forth in Section
5.1(b).
"Pension Plan" shall have the meaning set forth in Section
3.15(c).
"Permits" shall have the meaning set forth in Section 3.1(e).
"Permitted Encumbrances" shall have the meaning set forth in
Section 3.13(i).
"Person" shall mean an individual or a corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Plans" shall have the meaning set forth in Section 3.15(a).
"Preferred Offer" shall have the meaning set forth in the
Amended Articles of Incorporation.
"Project Debt" shall mean the debt incurred in connection with
the projects set forth in Schedule 1.1 of the Disclosure Letter under the
heading "Debt Incurrence."
"Property Restrictions" shall have the meaning set forth in
Section 3.13(i).
"Proxy Statement" shall have the meaning set forth in Section
5.1(b).
"Purchase Price" shall have the meaning set forth in Exhibit
A.
"REA" and "REAs" shall have the respective meanings set forth
in Section 3.13(g).
"Registration Rights Agreement" shall have the meaning set
forth in the recitals hereof.
"Regulatory Filings" shall have the meaning set forth in
Section 3.6(e).
"REIT" shall have the meaning set forth in Section 7.1(f).
"Rent Roll" shall have the meaning set forth in Section
3.13(a).
"SDAT" shall have the meaning set forth in Section 3.6(e).
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"SEC" shall mean the Securities and Exchange Commission.
"Securities" means the collective reference to the Company
Series B Preferred Shares and the Warrants.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Securities Laws" mean the Exchange Act and the Securities
Act.
"Security Deposits" shall have the meaning set forth in
Section 3.13(c).
"Special Committee" shall have the meaning set forth in the
recitals.
"Stockholder Approval" shall have the meaning set forth in
Section 7.1(j).
"Stockholders Meeting" shall have the meaning set forth in
Section 5.1(c).
"Subsequent Transaction" shall have the meaning set forth in
Section 5.3.
"Subsidiary" shall mean, with respect to any party, any
corporation, partnership, joint venture, limited liability company, business
trust or other entity, of which such party directly or indirectly owns or
controls more than 50% of the equity interests.
"Superior Proposal" shall have the meaning set forth in
Section 5.3.
"Taxes" shall mean all federal, state, local and foreign
income, property, sales, franchise, employment, excise, withholding,
estimated and other taxes, tariffs or governmental charges of any nature
whatsoever including any liability under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), together with penalties,
interest or additions to Tax with respect thereto; and the term "Tax" shall
mean any of the foregoing Taxes.
"Tax Return" shall mean all returns, declarations, reports,
statements, and other documents required to be filed with any federal, state,
local or foreign tax authority in respect of Taxes.
"Tender Offer" shall have the meaning set forth in the
Merger Agreement.
"Termination Fee" shall have the meaning set forth in Section
9.2(b).
"Third Party Claim" shall have the meaning set forth in
Section 8.5.
"Third Party Indemnified Party" shall have the meaning set
forth in Section 8.5.
"Third Party Indemnifying Party" shall have the meaning set
forth in Section 8.5.
"Title Policy" and "Title Policies" shall have the respective
meanings set forth in Section 3.13(j).
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"Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement and the Voting Stockholders Agreement.
"Utility Equipment" shall have the meaning set forth in
Section 3.13(s).
"Voting Proposals" shall have the meaning set forth in Section
5.1(b) hereof.
"Voting Stockholders Agreement" shall have the meaning set
forth in the recitals hereof.
"Warrants" shall have the meaning set forth in the recitals.
ARTICLE II.
PURCHASE OF COMPANY PREFERRED SHARES; CLOSING
Section 2.1. AUTHORIZATION OF SECURITIES. Prior to the Closing, the Company
shall have duly (i) designated, created and authorized the Company Series B
Preferred Shares and the issuance and sale of shares thereof pursuant to this
Agreement and (ii) authorized the Warrants and the issuance and sale thereof
pursuant to this Agreement.
Section 2.2. SECURITIES PURCHASE.
(a) SALE AND PURCHASE. At the Closing, the Company shall issue and
sell to Buyer, and Buyer shall purchase from the Company, for an aggregate
purchase price of $100,000,000 (i) a total of 17,985,612 shares of Company
Series B Preferred Shares, having the rights, preferences, privileges and
restrictions set forth in the Amended Articles of Incorporation, each share
convertible into shares of Company Common Shares in accordance with the
terms of the Amended Articles of Incorporation, and (ii) the Warrants,
having the terms set forth in the form of Warrant attached hereto as
EXHIBIT D, to purchase an aggregate of 2,500,000 shares of Company Common
Shares. The number of Shares and Warrants to be purchased at the Closing by
each Buyer, and the portion of the aggregate purchase price to be paid by
each Buyer, are set forth next to each Buyer's name on EXHIBIT A hereto.
(b) DELIVERY OF SECURITIES; PAYMENT OF PURCHASE PRICE. The closing of
the purchase and sale of the Securities (the "Closing") shall take place
immediately subsequent to the Merger following the satisfaction or waiver
of each of the conditions set forth in Section 7.1 hereof or such other
date as Buyer and the Company agree in writing (the "Closing Date").
Delivery of the Securities purchased by Buyer pursuant to this Agreement
will be made at the Closing by the Company delivering to Buyer, against
payment of the purchase price therefor, (i) a stock certificate or
certificates, dated the Closing Date, free and clear of all Encumbrances
(unless created by Buyer or any of its Affiliates), representing the number
of Company Series B Preferred Shares purchased by Buyer with each
certificate being registered in the name of Buyer and (ii) Warrant
Certificates, dated the Closing Date, representing the number of Warrants
purchased by Buyer, with each such certificate being registered in the name
of the respective Buyer, duly executed and delivered by the Company and
Buyer. Payment by Buyer of the agreed purchase price for the Company Series
B Preferred Shares and Warrants shall be made by
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wire transfer (to the account of the Company previously designated by it in
writing) and the Company shall acknowledge receipt from Buyer of payment in
full.
Section 2.3. ADDITIONAL AGREEMENTS AND CLOSING DELIVERIES.
(a) In addition to the other obligations required hereby, at the
Closing, the Company shall deliver, or cause to be delivered, to Buyer the
following: all certificates and other instruments and documents required by
this Agreement to be delivered by the Company to Buyer at or prior to the
Closing.
(b) In addition to the delivery of the Purchase Price and the other
obligations required hereby, at the Closing, Buyer shall deliver, or cause
to be delivered, to the Company the following: if not previously delivered
to the Company, all other certificates, documents, instruments and writings
required pursuant hereto to be delivered by or on behalf of Buyer at or
before the Closing.
Section 2.4. TIME AND PLACE OF CLOSING. The Closing shall take place at
10:00 a.m. San Diego time on the Closing Date at the offices of Xxxxxx &
Xxxxxxx, 00000 Xxxx Xxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx or at such other place
and time as the Company and Buyer shall mutually agree.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer as follows:
Section 3.1. EXISTENCE; GOOD STANDING; AUTHORITY; COMPLIANCE WITH LAW.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland. The Company
is duly licensed or qualified to do business as a foreign corporation and
is in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by it therein or
in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified individually or in
the aggregate is not having and could not be reasonably expected to have a
material adverse effect on the business, assets, liabilities, results of
operations, condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse Effect"). The
Company has all requisite corporate power and authority to own, operate,
lease and encumber its assets and properties and carry on its business as
now conducted.
(b) Each of the Company's Subsidiaries is a limited liability company,
corporation or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has the power and authority to own its assets and properties
and to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction in
which the ownership, lease or use of its property or the conduct of its
business requires such qualification, except for jurisdictions in
12
which such failure to be so qualified or to be in good standing would not
have a Company Material Adverse Effect.
(c) Schedule 3.1 of the letter dated the date hereof and delivered by
the Company concurrently with the execution and delivery of this Agreement
(the "Disclosure Letter") sets forth, as of the date hereof, (i) the name
and jurisdiction of incorporation or organization of each Subsidiary of the
Company and (ii) if any Subsidiary is not wholly owned, directly or
indirectly, by the Company, the record and beneficial owners of outstanding
shares of its capital stock or beneficial interests, as applicable.
(d) Within the past three years neither the Company nor any of its
Subsidiaries has received written notice that it is in violation of any
order of any federal, state, local or foreign governmental body, court,
arbitration board, tribunal, commission, agency or authority ("Governmental
Entity"), or any law, ordinance, governmental rule or regulation to which
the Company or any Company Subsidiary or any of their respective properties
or assets is subject, where such notice remains pending and any such
alleged violation would have a Company Material Adverse Effect.
(e) To the Knowledge of the Company, the Company and its Subsidiaries
hold all material permits, registrations, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Permits") and have taken all
material actions required by applicable law or governmental regulations in
connection with their business as now conducted. The Company and its
Subsidiaries are in material compliance with the terms of the Permits and
such Permits are valid and in full force and effect.
(f) True and correct copies of the Company's Charter Documents and the
Bylaws of the Company (the "Bylaws") have been made available to Buyer.
Section 3.2. AUTHORITY RELATIVE TO AGREEMENTS; APPROVALS.
(a) The execution, delivery and performance of the Transaction
Documents have been duly and validly authorized by all necessary action on
the part of the Company. This Agreement and the Voting Stockholders
Agreement have been duly executed and delivered by the Company for itself,
and upon the Closing, the Registration Rights Agreement shall be duly
executed and delivered by it and upon execution and delivery by Buyer,
constitute the valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights or general principles of equity.
(b) The Special Committee and the Board have, as of the date hereof,
approved the Transaction Documents and the transactions contemplated hereby
and thereby, and the Special Committee and the Board have determined to
recommend that the stockholders of the Company vote in favor of the Voting
Proposals.
(c) The Company Series B Preferred Shares, the Conversion Shares and
the Company Common Shares to be issued pursuant to the Warrants have been
duly authorized and
13
reserved for issuance, and will be issued in accordance with the
registration or qualification requirements of the Securities Act and any
relevant state securities laws or pursuant to valid exemptions therefrom,
and upon issuance in accordance with the provisions of this Agreement and
the Warrant will be duly and validly issued, fully paid and nonassessable
and not subject to any preemptive or similar rights, except that
stockholders may be subject to further assessment with respect to certain
claims for tort, contract, taxes, statutory liability and otherwise in some
jurisdictions to the extent such claims are not satisfied by the Company.
(d) The issue and sale of the Company Series B Preferred Shares and
the Warrants hereunder will not give any stockholder of the Company the
right to demand payment for its shares under Maryland law or give rise to
any preemptive or similar rights.
Section 3.3. CAPITALIZATION.
(a) The authorized shares of capital stock of the Company consist of
100,000,000 shares of capital stock, $.0001 par value per share, of which
74,000,000 are classified as Company Common Shares and 26,000,000 are
classified as 8 3/4% Series A Cumulative Redeemable Preferred Stock (the
"Company Series A Preferred Shares").
(b) As of March 16, 2001, the Company had issued and outstanding
13,309,006 Company Common Shares and 23,915,296 Company Series A Preferred
Shares.
(c) Immediately following the consummation of the transactions
contemplated by this Agreement, the authorized shares of capital stock of
the Company shall consist of 150,000,000 shares of capital stock, $.0001
par value per share, of which 97,038,596 shall be classified as Company
Common Shares, 27,849,771 shall be classified as the Company Series A
Preferred Shares and 25,111,633 shall be classified as Company Series B
Preferred Shares.
(d) Except as set forth in Schedule 3.3 of the Disclosure Letter
immediately following the consummation of the transactions contemplated by
this Agreement, the Company will have issued and outstanding 53,686,439
Company Common Shares, 23,915,296 Company Series A Preferred Shares and
17,985,612 Company Series B Preferred Shares.
(e) Except for the Company Series A Preferred Shares and as set forth
in Schedule 3.3 of the Disclosure Letter, the Company has no outstanding
shares, bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote (other than the Options)) with the
holders of Company Common Shares on any matter. All such issued and
outstanding Company Common Shares and Company Series A Preferred Shares
are, and all shares reserved for issuance will be, upon issuance in
accordance with the terms specified in the instruments or agreements
pursuant to which they are issuable, duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights, except that stockholders
may be subject to further assessment with respect to certain claims for
tort, contract, taxes, statutory liability and otherwise in some
jurisdictions to the extent such claims are not satisfied by the Company.
14
(f) Except as set forth in Schedule 3.3 of the Disclosure Letter,
there are no existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Company or any of its Subsidiaries to issue, transfer or sell any shares of
stock of the Company or any of its Subsidiaries (collectively, "Options").
(g) The Company has paid all declared dividends on the Company Series
A Preferred Shares.
(h) There are no agreements or understandings to which the Company is
a party with respect to the voting of any Company Common Shares or which
restrict the transfer of any such shares, nor does the Company have
Knowledge of any such agreements or understandings with respect to the
voting of any such shares or which restrict the transfer of any such shares
other than those set forth in the Charter Documents with respect to the
maintenance of the Company as a REIT and the share ownership limit set
forth therein. Other than with respect to the Series A Preferred Shares,
there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any Company Common Shares or any
other securities of the Company.
(i) The Company is not under any obligation, contingent or otherwise,
by reason of any agreement to register any of its securities under the
Securities Act.
Section 3.4. SUBSIDIARIES. Except as set forth in Schedule 3.4 of the
Disclosure Letter, the Company owns directly or indirectly each of the
outstanding shares of capital stock or all of the partnership or other equity
interests of each of its Subsidiaries (the "Company Subsidiaries"). Each of the
outstanding shares of capital stock of or other equity interest in each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned by the Company or a wholly-owned Company Subsidiary
free and clear of all Encumbrances. There are no outstanding Options (except as
set forth in Schedule 3.3 of the Disclosure Letter) obligating the Company or
any Company Subsidiary to issue or sell any shares of capital stock of, or other
equity interest in, any Subsidiary of the Company or to grant, extend or enter
into any such option or voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
the Company or any Company Subsidiary with respect to the voting of or the right
to participate in dividends or other earnings on any capital stock of any
Company Subsidiary.
Section 3.5. OTHER INTERESTS. Except for interests in the Company
Subsidiaries and as set forth in Schedule 3.5 of the Disclosure Letter, neither
the Company nor any Company Subsidiary owns directly or indirectly any interest
or investment (whether equity or debt) in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture, business, limited liability company,
trust or entity (other than investments in short-term investment securities).
Section 3.6. NO CONFLICTS; NO DEFAULTS; REQUIRED FILINGS AND CONSENTS.
Neither the execution and delivery by the Company hereof, nor the consummation
by the Company of the transactions contemplated hereby in accordance with the
terms hereof, will:
15
(a) conflict with, violate or result in a breach of any provisions of
(i) the Charter Documents or Bylaws of the Company or (ii) the Charter
Documents of any Company Subsidiary (assuming, in each case, the Company's
receipt of an executed certificate in the form of Exhibit G for each
Warburg Entity);
(b) result in any material breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to, or
accelerate vesting under, any compensation plan or any grant or award of
the Company or any Company Subsidiary;
(c) violate or conflict with any statute, law, rule, ordinance,
regulation, judgment, order, writ, decree, permit or injunction of any
Governmental Entity applicable to the Company or its Subsidiaries;
(d) violate or conflict with or result in any material breach of any
material provision of, or constitute a default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination or in a right of termination or cancellation of,
or accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the properties of the Company or its Subsidiaries
under, or result in being declared void, voidable or without further
binding effect, or result in or give to any person any right of payment or
reimbursement, termination, cancellation or modification of any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed to secure debt, security agreement, reciprocal easement agreement,
management agreement, leasing agreement or deed of trust or any license,
franchise, permit, lease, sublease, occupancy agreement, contract,
agreement or other instrument, commitment or obligation (collectively,
"Contracts") to which the Company or its Subsidiaries is a party, or by
which the Company or its Subsidiaries or any of their respective assets or
properties is bound or affected in each case, as the same may have been
modified, amended, extended or renewed; or
(e) require any consent, registration, declaration, filing, approval
or authorization of, or declaration, filing or registration with, any other
party to any contract, or any Governmental Entity, other than any filings
required under the Securities Act, the Exchange Act, state securities laws
("Blue Sky Laws"), the laws of any foreign country in which the Company or
its Subsidiaries conducts any business or owns any property or assets
(collectively, the "Regulatory Filings"), and any material filings required
to be made with the Department of Assessments and Taxation of the State of
Maryland ("SDAT") or any national securities exchange on which the Company
Common Shares are listed. Except as set forth in Schedule 3.6 of the
Disclosure Letter and the Schedules thereto, no consent, approval or action
of, filing with or notice to, any other party to any contract, or any
Governmental Entity or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any law or
order of any Governmental Entity or any Contract to which the Company or
any Company Subsidiary or any of their respective assets or properties is
bound for the execution and delivery of this Agreement, the performance by
the Company of its obligations hereunder or the consummation of the
transactions contemplated hereby.
Section 3.7. SEC DOCUMENTS. The Company has made available to Buyer prior
to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement (as declared effective and any
post-effective amendments), definitive proxy statement
16
and other documents (together with all amendments thereof and supplements
thereto) filed by the Company or any Company Subsidiary with the SEC since
December 31, 1999 (as such documents have since the time of their filing been
amended or supplemented, the "Company Reports"), which are all the documents
(other than preliminary material) that the Company or any other Company
Subsidiary were required to file under the Securities Laws since such date. The
Company has timely filed all Company Reports since December 31, 1999. As of
their respective dates, the Company Reports (i) complied in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the audited consolidated financial statements and unaudited
interim financial statements ("Financial Statements") of the Company included in
or incorporated by reference into the Company Reports (including in each case
the related notes and schedules) complied as to form in all material respects
with the Securities Laws and fairly presents the consolidated financial position
of the Company and its Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings, results of operations and cash flows of
the Company included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and the Company Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted therein
and except, in the case of the unaudited statements, as permitted by Form 10-Q
or Form 8-K of the SEC.
Section 3.8. LITIGATION. Except as set forth in Schedule 3.8 of the
Disclosure Letter, there are (i) not in effect any orders, injunctions or
decrees of any Governmental Entity to which the Company or any Company
Subsidiary is a party or by which any of its properties or assets are bound or,
to the Knowledge of the Company, any such orders, injunctions or decrees
relating to the Company to which any of its directors, officers, employees or
agents is a party, and (ii) no actions, suits, arbitrations or proceedings
pending or, to the Knowledge of the Company, threatened against, relating to or
affecting the Company or any Company Subsidiary or, except as set forth in
Schedule 3.8 of the Disclosure Letter and fully covered by insurance, relating
to any of the Company Properties. To the Knowledge of the Company, there are no
Governmental Entity investigations or audits pending or threatened against,
relating to or affecting the Company, any of the Company Subsidiaries or any of
their respective assets or properties or against any of its directors, trustees,
officers, employees or agents in such capacity or, to the Knowledge of the
officers of the Company, threatened against the Company or any Company
Subsidiary or against any of its directors, trustees, officers, employees or
agents in such capacity at law or in equity, or before or by any federal or
state commission, board, bureau, agency or instrumentality.
Section 3.9. ABSENCE OF CERTAIN CHANGES. Except as expressly disclosed in
the Company Reports filed prior to the date hereof, since December 31, 1999, the
Company and its Subsidiaries have conducted their business only in the ordinary
course of such business consistent with past practices and there has not been
(i) any Company Material Adverse Effect, (ii) any material commitment,
contractual obligation, borrowing, capital expenditure or
17
transaction (each, a "Commitment") entered into by the Company or any of its
Subsidiaries, other than Commitments in the ordinary course of business and/or
the Merger Agreement, (iii) any action taken which, if taken after the date
hereof, would constitute a breach of any provision or covenant herein, or (iv)
any material change in the Company's accounting principles, practices or
methods.
Section 3.10. UNDISCLOSED LIABILITIES. Except (a) as disclosed in the
Financial Statements, and (b) for liabilities and obligations (i) incurred in
the ordinary course of business and consistent with past practice since December
31, 1999, (ii) pursuant to the terms of this Agreement, (iii) as disclosed on
Schedule 3.10 of the Disclosure Letter, the Company does not have any debt,
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due, whether or not known to the Company)
arising out of any transaction entered into at or prior to the Closing, or any
act or omission at or prior to the Closing, including taxes with respect to or
based upon the transactions or events occurring at or prior to the Closing, and
including, without limitation, unfunded past service liabilities under any
pension, profit sharing or similar plan.
Section 3.11. TAXES.
(a) The Company and each Company Subsidiary have (i) timely filed all
Tax Returns required to be filed by any of them prior to the date hereof
and all such Tax Returns are correct and complete in all material respects,
(ii) paid all material Taxes for which they are separately or jointly
liable, whether or not such Taxes are shown as due on Tax Returns, (iii)
paid or caused to be paid or adequately accrued or reserved on its most
recent balance sheet for all material Taxes which have become due and
payable pursuant to any assessment, deficiency notice, 30-day letter or
other notice received by it, (iv) accrued or reserved on its most recent
balance sheet for any material liability for Taxes of the Company or any of
its Subsidiaries not yet due and payable, and (v) complied in all material
respects with all applicable laws relating to Taxes, including withholding
Taxes. The Company has not received any notice of any audit (not since
closed) of any Tax Return filed by the Company with respect to any tax year
ending after December 1996, and the Company has not been notified by the
IRS or any state or local taxing authority that any such audit is
contemplated or pending. Neither the Company nor any of its Subsidiaries
has executed or filed with the IRS or any other taxing authority any
agreement now in effect extending the period for assessment or collection
of any Taxes. There is no action, suit, proceeding, investigation, audit or
claim now pending against, or initiated with respect to, the Company or any
of its Subsidiaries in respect of any Tax. Neither the Company nor any of
its Subsidiaries has Knowledge of any such action, suit, proceeding,
investigation, audit, or claim being threatened by any tax authority
against, or with respect to, the Company or any of its Subsidiaries in
respect of any Tax (For this purpose, knowledge of any Company employee
whose course of employment includes tax matters is deemed to constitute
Knowledge). No property of the Company or any of its Subsidiaries is
"tax-exempt use property" within the meaning of section 168(h) of the Tax
Code. Neither the Company nor any of its Subsidiaries is a party to any
lease made pursuant to former Section 168(f)(8) of the Internal Revenue
Code of 1954. No ruling with respect to Taxes (other than a request for a
determination of the status of a qualified pension plan) has been requested
by or on behalf of the Company or any of its Subsidiaries. Except as set
forth in Schedule 3.11 of the Disclosure Letter, no closing agreement
pursuant to section 7121 of the Code (or any predecessor provision)
18
or any similar provision of any state, local or foreign law has been
entered into by or on behalf of the Company or any Company Subsidiary.
Except as set forth in Schedule 3.11 of the Disclosure Letter, no
jurisdiction where the Company or any Company Subsidiary has not filed a
Tax Return has made a claim that the Company or such Company Subsidiary is
required to file a Tax Return in such jurisdiction. All material elections
with respect to Taxes of the Company or any Company Subsidiary are set
forth in Schedule 3.11 of the Disclosure Letter. The Company and each
Company Subsidiary have previously made available to Buyer complete and
accurate copies of each of (i) all audit reports, letter rulings and
technical advice memoranda relating to federal, state, local or foreign
Taxes due with respect to the income or business of the Company or any
Subsidiary, (ii) all income Tax Returns filed with any taxing authority (or
the relevant portions of any combined, consolidated, or unitary Tax Return
filed in any jurisdiction of which the Company or any Subsidiary is a
member, including, without limitation, information relating to the
computation of taxable income) filed by or on behalf of the Company or any
Subsidiary in the last six years, and (iii) any closing agreement,
settlement agreement or similar agreement or arrangement entered into by or
on behalf of the Company or any Subsidiary with any taxing authority. The
Company has incurred no liability for Taxes under Section 857(b), 860(c) or
4981 of the Code, including any Tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code. There are no Tax liens upon the
assets of the Company or any of the Company Subsidiaries except liens for
Taxes not yet due or payable. Except as between or among the Company and
the Company Subsidiaries, neither the Company nor any Company Subsidiary is
a party to any agreement relating to a sharing or allocation of Taxes, or
has any liability for Taxes of any person other than the Company and the
Company Subsidiaries under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local or foreign law), by contract or otherwise.
(b) The Company (i) has elected to be taxed as a REIT commencing with
its short taxable year ended December 31, 1997, (ii) has been subject to
taxation and has filed its Tax Returns consistent with its status as a REIT
and has satisfied all requirements to qualify as a REIT for all taxable
years commencing with its short taxable year ended December 31, 1997
through its taxable year ended December 31, 2000, (iii) has operated since
December 31, 2000 to the date of this representation, and intends to
continue to operate, in such a manner so as to qualify as a REIT (for U.S.
federal and California State income tax purposes) for its taxable year
ending on December 31, 2001, and (iv) has not taken or omitted to take any
action which would result in a challenge to its status as a REIT, has not
received notice of such a challenge, and to the knowledge of the executive
officers of the Company, no such challenge is pending or threatened (for
this purpose, knowledge of any Company employee is deemed to constitute
Knowledge). The Company represents that each of its Corporate Subsidiaries
is, and at all times since its affiliation with the Company has qualified
as, a qualified REIT subsidiary as defined in Section 856(i) of the Code,
and that each of its Subsidiaries that is a partnership, limited liability
company, joint venture or other legal entity (other than a corporation) has
been treated since its formation and continues to be treated for federal
income tax purposes as a partnership or disregarded as an entity separate
from its owner and not as an association taxable as a corporation. Except
as set forth in Schedule 3.11 of the Disclosure Letter, none of the Company
or the Company Subsidiaries (i) as of December 31, 2000, holds any assets
the disposition of which would be subject to results similar to Section
1374 of the Code as a result of an election
19
under IRS Notice 88-19 or Temporary Treasury Regulation Section 1.337-5T or
(ii) any earnings and profits accumulated in any non-REIT year within the
meaning of Section 857 of the Code.
(c) The Company has not agreed, and is not required, to make any
adjustment under Section 481(a) of the Code.
(d) The Company has not, with regard to any assets or property held or
acquired by it, filed a consent to the application of Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "subsection (f) asset" (as such term is defined in Section
341(f)(4) of the Code) owned by the Company.
(e) Neither the Company nor any of its Subsidiaries is a "foreign
person" as such term is defined in Section 1445(f)(3) of the Code.
Section 3.12. BOOKS AND RECORDS.
(a) The books of account and other financial records of the Company
and its Subsidiaries (i) are in all material respects true, complete and
correct, (ii) have been maintained in accordance with sound business
practices, (iii) have been maintained in a manner consistent with past
practice, (iv) have recorded therein all the properties and assets and
liabilities of the Company required to be reflected under GAAP, (v) reflect
all transactions entered into by the Company or the Company Subsidiaries or
to which the Company or the Company Subsidiaries is a party and (vi) are
accurately reflected in the Financial Statements included in the Company
Reports.
(b) The minute books and other records of the Company and its
Subsidiaries, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other trust or
corporate action of the stockholders and trustees or directors and any
committees thereof of the Company and its Subsidiaries and all actions of
the partners or members of the Company's Subsidiaries.
Section 3.13. PROPERTIES.
(a) The Company and its Subsidiaries own good and marketable fee
simple title to, or hold valid ground leases (each a "Ground Lease," and
collectively "Ground Leases") in, each of the real properties identified
separately as owned or leased real property in Schedule 3.13 of the
Disclosure Letter and the improvements situated thereon (each a "Company
Property," and collectively the "Company Properties"), which are all of the
real estate properties owned or leased directly or indirectly by them.
Schedule 3.13 of the Disclosure Letter sets forth a true, correct and
complete copy of the rent rolls of the Company Properties (the "Rent Roll")
as of March 1, 2001 and identifies all leases, as amended, supplemented or
modified of greater than 10,000 square feet and a term of greater than
three years (each a "Lease", and collectively, "Leases"). None of the
Company Properties is subject to any right or option of any other person to
purchase or lease or otherwise obtain title to, or any interest in, such
Company Property. Other than the rights of tenants under the Leases no
person, other than the Company or its Subsidiaries has the right to use,
occupy or lease any of the Company Properties.
20
(b) Except as identified on Schedule 3.13 of the Disclosure Letter, no
tenant under any of the Leases has made any claim of material default by
the landlord which continues uncured as of the date hereof. Neither the
Company nor any of its Subsidiaries has sent any notice of material default
to any of the lessees under any of the Leases, which default has not been
cured, and, to the Knowledge of the Company and its Subsidiaries, there
currently exist no defaults by any of the tenants under any of the Leases.
(c) There are no leases executed by the Company or its Subsidiaries or
other rights of occupancy or use granted by the Company or its Subsidiaries
or their predecessors in title of any portion of any of the Company
Properties other than the Leases. Each of the Leases is valid and
subsisting and in full force and effect, and no rents or other payments or
deposits are held by the Company, the Company's Subsidiaries or their
agent, except the security deposits (together with the amount of accrued
and unpaid interest thereon) described on the Rent Roll (the "Security
Deposits") and rents prepaid for the current month. The Rent Roll reflects
all of the Leases as modified, amended or supplemented. Except as set forth
in Schedule 3.13 of the Disclosure Letter, no material amount due under any
Lease remains unpaid and no material controversy, claim, dispute or
disagreement exists between the parties to the Leases. The Company and/or
its Subsidiaries has completed all material tenant improvement work and
other alteration required to be performed by the Company and/or its
Subsidiaries prior to the date hereof pursuant to such Lease.
(d) Except as set forth in Schedule 3.13 of the Disclosure Letter, no
rents due under, or any other interest in, any of the Leases have been
assigned, pledged or encumbered in any way.
(e) All Security Deposits are being, and have been, held in compliance
in all material respects with all laws, ordinances, order, rules,
regulations and requirements of any governmental entity which may be
applicable thereto.
(f) No broker, finder, investment banker or other person is entitled
to any broker's commission, finders fee or other fee or commission payable
by the Company or any of its Subsidiaries with respect to the Properties
except as disclosed in the Company Reports.
(g) Schedule 3.13 of the Disclosure Letter lists all (i) agreements
under which the Company or its Subsidiaries hold, operate or manage any
real property owned or leased by any third party and , (ii) (other than
agreements which terminate on no more than 30 days notice and which
obligate the Company or its subsidiaries for monthly payments of less than
or equal to $10,000 per month) agreements under which any third party
holds, operates or manages any of the Company Properties. There are no
reciprocal easement agreements, construction, operating and reciprocal
easement agreements, operating agreements, development agreements and
similar agreements (each an "REA", and collectively "REAs") which are
likely to have a material adverse effect on the Company Property to which
such REAs relate.
(h) Neither Company nor any of its Subsidiaries has received any
notice of any material default under any of the Ground Leases and, to its
Knowledge, neither Company nor any of its Subsidiaries is in default under
any of the Ground Leases. Neither the Company nor any of its Subsidiaries
has sent any notice of default to any of the lessors under any of the
21
Ground Leases which default has not been cured, and, to the Knowledge of
the Company and its Subsidiaries, there currently exist no material
defaults by any of the ground lessors under any of the Ground Leases. To
the Knowledge of Company and its Subsidiaries, no conditions currently
exist which may foreseeably lead to a material default by the Company, its
Subsidiaries or any lessor under any of the Ground Leases. Schedule 3.13 of
the Disclosure Letter sets forth the expiration date of each Ground Lease
and any extension or renewal options thereto.
(i) The Company Properties are not subject to any rights of way,
written agreements (other than leases, subleases or occupancy agreements),
laws, ordinances and regulations affecting building use or occupancy or
reservations of an interest in title (collectively, "Property
Restrictions"), liens, claims, encumbrances, mortgages or deeds of trust,
charges which are liens, security interests, rights-of-way, easements,
encroachments or other encumbrances of any kind (each an "Encumbrance" and,
collectively, "Encumbrances"), other than (i) Encumbrances set forth on the
Title Policies (as hereinafter defined), (ii) Encumbrances, whether or not
of record, which do not, individually or in the aggregate, have a Company
Material Adverse Effect on the operation of the business of the Company and
its Subsidiaries as presently conducted, the present use of the Company
Properties or the value of the Company Properties subject thereto or
affected thereby, (iii) Encumbrances for taxes, assessments or governmental
charges which may be liens but are not yet due and payable or which are
being contested in good faith and without risk of the Company Properties
being forfeited or sold in connection with such contest, (iv) Encumbrances
that a current, accurate survey of the Company Properties would disclose,
provided that such Encumbrances do not, individually or in the aggregate,
have a Company Material Adverse Effect on the operation of the business of
the Company and its Subsidiaries as presently conducted, the present use of
the Company Properties or the value of the Company Properties subject
thereto or affected thereby and (v) Property Restrictions imposed or
promulgated by law or any governmental body or authority with respect to
real property, including zoning regulations (excluding Encumbrances under
Environmental Laws which are addressed in Section 3.14 hereof) (subclauses
(i) through (v), collectively, "Permitted Encumbrances").
(j) Valid policies of title insurance (each a "Title Policy", and
collectively, "Title Policies") have been issued insuring the Company's or
one or more of its Subsidiaries' fee simple or leasehold title to each of
the Company Properties owned in fee or by leasehold in amounts at least
equal to the purchase price thereof, subject only to the matters set forth
therein or disclosed above, and such policies are, at the date hereof, in
full force and effect. After giving effect to the transactions contemplated
hereby, the Company will have adequate title insurance, property insurance
and liability insurance. The Company and its Subsidiaries have no knowledge
of any defects, liens, encumbrances, adverse claims or other matters to be
insured against under any of the Title Policies (collectively, "Insured
Matters") that could result in the issuer of any Title Policy denying its
liability to the Company or a Company Subsidiary on the grounds that the
Company or a Company Subsidiary had Knowledge of such Insured Matters
solely by reason of notice thereof imputed to it as matter of law through
either the Company, its Subsidiary or any Affiliate thereof. Schedule 3.13
of the Disclosure Letter contains a true, complete and accurate list
including the amounts thereof of all policies of insurance with respect to
the Company Properties, which policies are in full force and effect. All
premiums for such insurance policies have been paid in full. To the
Company's and its Subsidiaries' Knowledge,
22
neither the Company nor its Subsidiaries have performed, permitted or
suffered any act or omission which would cause the insurance coverage
provided in said policies to be reduced, canceled, denied or disputed and
neither the Company nor any of its Subsidiaries has received (and has no
Knowledge of) any notice or request from any insurance company or Board of
Fire Underwriters (or organization exercising functions similar thereto)
canceling or threatening to cancel any of said policies or denying or
disputing coverage thereunder.
(k) The Company and its Subsidiaries shall reasonably cooperate with
the Buyer in the event that the Buyer elects to order a title commitment,
purchase title insurance and/or order surveys with respect to any or all of
the Company Properties, including executing all title affidavits or other
documents reasonably and customarily required by the title company issuing
such title commitments, insurance and/or surveys. The cost and expense of
obtaining such title commitment, and any and all endorsements, affirmative
insurance or modifications thereto, shall be borne by Buyer.
(l) If requested by Buyer, the Company and its Subsidiaries shall use
reasonable efforts to assist the Buyer at Buyer's cost and expense, in
obtaining a non-imputation endorsement or similar title insurance coverage
in favor of the Buyer with respect to each title insurance policy currently
in effect with respect to any Company Properties including, without
limitation, the execution of any affidavits or other documents, as
reasonably required by each such title company, in order to induce each
such title company to issue such endorsements or similar coverage.
(m) The Buyer may obtain current surveys of all of the Company
Properties as deemed necessary or advisable by the Buyer in its sole
discretion. The cost and expense of such surveys shall be borne exclusively
by Buyer. If the Buyer elects to obtain current surveys, such surveys shall
(i) be prepared by a surveyor or engineer licensed in the state in which
the specific Company Property is located (each such survey shall be
prepared in accordance with the Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys adopted by the American Land Title Association
and the American Congress on Surveying & Mapping 1997, certified to the
Buyer's title insurance company (if any), the Buyer, and mortgagee of the
Buyer and such other parties as the Buyer may designate) and (ii) not
disclose any matters relating to the Company's or its Subsidiaries' title
to the subject Company Property which make any of the representations or
warranties contained herein inaccurate.
(n) Any material certificate or Permit from any Governmental Entity
having jurisdiction over any of the Company Properties and any agreement,
easement or other right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the Company
Properties or which is necessary to permit the lawful use and operation of
all driveways, roads and other means of egress and ingress to and from any
of the Company Properties which are currently occupied and are material to
the operation of the property have been obtained and are in full force and
effect. The Company is not in receipt of any notice of any material
violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any of the Company
Properties issued by any Governmental Entity and which have not been fully
remedied and discharged of record.
23
(o) There are (i) to the Knowledge of the Company, no material
structural defects relating to the Company Properties, (ii) to the best
knowledge of the Company, no Company Properties whose building systems are
not in working order in any material respect (except for normal maintenance
and operating systems failures which in any event are the subject of
adequate pending repair procedures), (iii) no instances of physical damage
to any Company Property in excess of $100,000 for which there is no
insurance in effect covering the cost of the restoration as of the date
hereof or (iv) other than routine capital expenditures, no current
renovations or restorations of any Company Property underway or for which
contracts have been entered into the cost of which exceeds $250,000. There
is no work other than routine capital expenditures currently in progress or
contemplated at any of the Company Properties where the amount remaining to
be paid to complete such work is in excess of $100,000.
(p) Neither the Company nor any Company Subsidiary has received any
written notice to the effect that, or has Knowledge of, (i) any
condemnation, eminent domain, incorporation, annexation or moratorium or
rezoning or similar proceedings pending or threatened with respect to any
of the Company Properties or (ii) any zoning, building or similar law,
code, ordinance, order or regulation is or will be violated in any material
respect by the Company or its Subsidiaries by the continued maintenance,
operation or use of any buildings or other improvements on any of the
Company Properties as currently maintained, used or operated by the Company
or its Subsidiaries or by the continued maintenance, operation or use of
the parking areas as currently maintained, used or operated by the Company
or its Subsidiaries which is not insured over and where the remedying of
such violations would adversely affect (other than in an immaterial manner)
the relevant Company Property. Neither the Company nor its Subsidiaries
have received written notice from any Governmental Entity, any tenant under
a Lease or any party to any other agreement or document, or otherwise has
Knowledge, that the number of parking spaces at any Company Property is
required under any legal requirement, any Lease, or any REA, to be
increased above the number of parking spaces existing on the date hereof.
(q) All work to be performed, payments to be made and actions to be
taken by the Company or its Subsidiaries prior to the date hereof pursuant
to any agreement entered into with a governmental body or authority in
connection with a site approval, zoning reclassification or other similar
action relating to the Company Properties (E.G., Local Improvement
District, Road Improvement District, Environmental Mitigation) has been
performed, paid or taken, as the case may be, in all material respects, and
the Company is not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant to such
agreements.
(r) The Company or its Subsidiaries own all personalty located at the
Company Properties except (i) personalty owned by tenants and (ii) material
personalty that is leased and identified on Schedule 3.13 of the Disclosure
Letter. All improvements on the Company Properties are in good condition
and repair (normal wear and tear excepted) and have not suffered any
casualty or other material damage that has not been repaired in all
material respects with respect to such Company Properties. To the Company's
and its Subsidiaries' Knowledge, there is no material latent or patent
structural, mechanical or other significant defect, soil condition or
deficiency in the improvements located on the Company Properties.
24
(s) All HVAC, electric, gas, fire-safety, plumbing, mechanical and
other systems at each of the Company Properties are in good, working
condition and no portion of the same presently require replacement or
significant repair (I.E., repairs which are ordinarily capitalized under
generally accepted accounting principles). Neither the Company nor any of
its Subsidiaries has received any notice from any utility company or
municipality of the possible discontinuation of currently available or
otherwise necessary sewer, water, electric, gas, telephone or other
utilities or services for the Company Properties.
(t) The Company owns less than $50,000,000 of non-exempt assets as
such term is construed under Section 802.4 of the rules and regulations
promulgated under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
(u) To the Company's Knowledge, the Company has provided Buyer with
access to any and all certificates, licenses, permits, leases, subleases,
occupancy agreements, ground leases, operating agreements, books, records,
documents, contracts and information relating to the Company Properties and
the ownership and operation thereof which are in possession and control of
Company or any of its Subsidiaries.
(v) There is no single item of furniture, equipment, vehicles,
computers, asset (other than real property owned or leased by the Company
and its Subsidiaries) having a value individually in excess of $150,000,
owned by the Company and its Subsidiaries and none of such assets is in
need of repair or replacement, other than in the ordinary course of
business.
(w) There are no tax abatements or exemptions specifically affecting
the Company Properties, and the Company and its Subsidiaries has not
received any written notice of (and the Company and its Subsidiaries do not
have any Knowledge of) any proposed increase in the assessed valuation of
the Company Properties or of any proposed public improvement assessments
which abatements, exemptions, assessments or increases in valuation could
reasonably be expected to have a Company Material Adverse Effect. None of
the Company Properties are located in any conservation or historic
district, or are historically certified, subject to historic preservation
rules, regulations or requirements or designated as a landmark. No
application or proceeding for any such certification or designation is
pending or, to the Company's or its Subsidiaries' Knowledge, is threatened.
To the Knowledge of the Company, none of the Company Properties are located
in an area that has been identified as having special flood hazards.
(x) The Company shall pay all recording fees, transfer taxes or other
similar taxes, if any, payable in connection with the Company Properties by
reason of the transactions contemplated herein.
Section 3.14. ENVIRONMENTAL MATTERS. Except as set forth under the
appropriate subsection in Schedule 3.14 of the Disclosure Letter:
(a) The activities and operations carried out by the Company and its
Subsidiaries and, to the Knowledge of the Company, the activities and
operations of all tenants and subtenants at the Company Properties are in
compliance in all material respects with all applicable Environmental Laws.
25
(b) No lien of record, deed or use restriction has been imposed on any
of the Company Properties by any Governmental Entity under, any
Environmental Law.
(c) None of the Company and its Subsidiaries has received written
notice or has Knowledge (i) of any pending or threatened litigation, claim,
investigation or proceeding before any Governmental Entity against the
Company or any Subsidiary under any Environmental Law or (ii) that the
Company or any Subsidiary has any material liability or potential liability
under any Environmental Law, or pursuant to any written agreement or, to
the Knowledge of the Company, oral agreement in connection with any of the
Company Properties, any previously owned or operated properties, or any
activities or operations conducted by or on behalf of, or otherwise
attributable to, the Company or any Subsidiary, or any of their respective
predecessors.
(d) To the Company's Knowledge, no hazardous substance including,
without limitation, any flammable, explosive, radioactive material,
hazardous waste, hazardous and toxic substance, asbestos-containing
material, petroleum, or any other substance regulated by any Environmental
Law as hazardous, toxic, dangerous or detrimental to human health and
safety (collectively, "Hazardous Materials"), has been disposed of, or
released in violation of any Environmental Law in or on the Company
Properties.
(e) There is no release of Hazardous Material present in, on or under
any Company Properties, which is required to be reported, investigated,
removed, remediated, monitored or otherwise addressed under any
Environmental Law which could reasonably be expected to result in a
material liability to the Company or any of its Subsidiaries or have a
material adverse effect on the value or use of the affected property.
(f) Any underground Hazardous Materials storage tanks presently or
formerly located on any of the Company Properties have been closed, removed
or upgraded in compliance in all material respects with Environmental Laws,
and any contamination related to or released from such tanks, which could
reasonably be expected to result in a material liability to the Company or
any of its Subsidiaries or have a material adverse effect on the value or
use of the affected property, has been remediated in accordance with
Environmental Laws.
(g) There are no dry cleaning establishments currently located on the
Company Properties and to the Knowledge of the Company no dry cleaning
establishments were formerly located on the Company Properties.
(h) None of the Company Properties is listed or proposed for listing
on the National Priorities List pursuant to CERCLA or the Comprehensive
Environmental Response Compensation Liability List ("CERCLIS") or any
analogous state lists.
(i) To the Company's knowledge, no Hazardous Materials have been
released in, on or under any property adjacent to any of the Company
Properties which will result in any liability to the Company or Company
Subsidiaries or in any diminution in value of any of the Company Properties
which could reasonably be expected to result in a material liability to the
Company or any of its Subsidiaries or have a material adverse effect on the
value or use of the affected property.
26
(j) The Company has provided all environmental assessments, audits,
investigations, reports and similar information in its possession or in the
possession of its representatives and/or agents to Buyer.
Section 3.15. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.15 of the Disclosure Letter sets forth all "employee
benefit plans", as defined in Section 3(3) of Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other material employee
benefit arrangements, policies or payroll practices, including, without
limitation, severance, sick leave, vacation pay, salary continuation for
disability, retirement, deferred compensation, bonus, incentive, change of
control, parachute, stock purchase, stock option, medical insurance, life
insurance, tuition reimbursement and scholarship programs maintained for
the benefit of, or to which contributions are made on behalf of, current or
former employees of the Company. Such plans, arrangements, policies,
programs and practices shall hereinafter be referred to as the "Plans".
(b) None of the Plans is a "multiemployer plan", as defined in Section
3(37) of ERISA ("Multiemployer Plan"). Neither the Company nor any trade or
business (whether or not incorporated) which is or has ever been treated as
a single employer with the Company under Section 414(b), (c), (m) or (o) of
the Code ("ERISA Affiliate") has incurred any liability due to a complete
or partial withdrawal from a Multiemployer Plan or due to the termination
or reorganization of a Multiemployer Plan, except for any such liability
which has been satisfied in full, and no events have occurred and no
circumstances exist that could reasonably be expected to result in any such
liability to the Company or any ERISA Affiliate.
(c) None of the Plans is a "single-employer plan", as defined in
Section 4001(a)(15) of ERISA ("Pension Plan"). Neither the Company nor any
ERISA Affiliate has any outstanding liability under Section 4062 of ERISA
to the Pension Benefit Guaranty Corporation or to a trustee appointed under
Section 4042 of ERISA or under any other provision of Title IV of ERISA,
and no events have occurred and no circumstances exist that could
reasonably be expected to result in any such liability to the Company or
any ERISA Affiliate. With respect to any plan sponsored by, or to which
contributions are required of, the Company or any ERISA Affiliate, there
does not exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA, whether or not waived.
(d) Each of the Plans that are intended to qualify under Section
401(a) of the Code, and the trusts maintained pursuant thereto, have been
determined to be so qualified and exempt from federal income taxation under
Section 501 of the Code by the IRS, and nothing has occurred with respect
to the operation of any such Plans which could reasonably cause the loss of
such qualification or tax exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code.
(e) All contributions (including all employer contributions and
employee contributions) required to have been made under the Plans or by
law to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before the
Closing Date which are not yet due will have been paid or accrued by the
Closing Date.
27
(f) There has been no material violation of ERISA or the Code with
respect to the filing of applicable documents, notices or reports
(including, but not limited to, annual reports filed on IRS Form 5500)
regarding the Plans with the Department of Labor or the IRS, or the
furnishing of such required documents to the participants or beneficiaries
of the Plans.
(g) True, correct and complete copies of the following documents, with
respect to each of the Plans, have been made available to Buyer: (i) the
plan and its related trust document, including any amendments thereto, (ii)
the most recent IRS Forms 5500 filed with the IRS and (iii) current summary
plan descriptions.
(h) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Plans, the assets of any of the trusts
under such Plans or the Plans' sponsor or administrator, or to the
Knowledge of the Company against any fiduciary of the Plans with respect to
such Plans (other than routine benefit claims).
(i) The Plans have been maintained, in all material respects, in
accordance with their express terms and with all provisions of ERISA and
the Code (including rules and regulations thereunder) and other applicable
federal and state laws and regulations, and neither the Company nor any
ERISA Affiliate has engaged in, or has Knowledge that a "party interest" or
a "disqualified person" has engaged in, a "prohibited transaction", as
defined in Section 4975 of the Code or Section 406 of ERISA, or taken any
actions, or failed to take any actions, which could reasonably result in
any material liability under ERISA or the Code. To the Knowledge of the
Company, no fiduciary has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of any of the Plans.
(j) None of the Plans provide retiree health or life insurance
benefits except as may be required by Section 4980B of the Code and Section
601 of ERISA, any other applicable law or at the expense of the participant
or the participant's beneficiary.
(k) Except as set forth in Schedule 3.15(k) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (either alone or in connection
with any subsequent event or act): (i) result in any material payment
becoming due to any current or former employee of the Company, (ii)
increase any benefits otherwise payable under any of the Plans, (iii)
result in the acceleration of the time of payment or vesting of any
benefits provided under any of the Plans, (iv) constitute a "change in
control" under any Plan or (v) result in any payment by the Company that
will not be deductible under Section 280G of the Code.
Section 3.16. EMPLOYEE AND LABOR MATTERS.
(a) Neither the Company nor any Subsidiary is a party to any labor or
collective bargaining agreement and there are no labor or collective
bargaining agreements which pertain to employees of the Company or any
Subsidiary.
(b) No employees of the Company or any Subsidiary are represented by
any labor organization. No labor organization or group of employees of the
Company or any
28
Subsidiary has made a pending written demand for recognition or
certification, and to the Knowledge of the Company, there are no
representation or certification proceedings presently pending or threatened
in writing to be brought or filed with the National Labor Relations Board
or any other labor relations tribunal or authority. To the Knowledge of the
Company, there are no organizing activities involving the Company or any
Subsidiary pending with any labor organization or group of employees of the
Company or any Subsidiary.
(c) There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor
disputes pending or threatened in writing against or involving the Company
or any Subsidiary. There are no unfair labor practice charges, grievances
or complaints pending or threatened in writing by or on behalf of any
employee or group of employees of the Company or any Subsidiary which, if
individually or collectively resolved against the Company or any
Subsidiary, as the case may be, could result in a material liability.
(d) There are no complaints, charges or claims against the Company or
any Subsidiary pending or threatened in writing to be brought or filed with
any public or governmental entity, arbitrator or court based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment by the Company or any of its Subsidiaries of any
individual.
(e) The Company and each Company Subsidiary are in compliance with all
laws, regulations and orders relating to the employment of labor, including
all such laws, regulations and orders relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar employment tax except for immaterial
non-compliance.
Section 3.17. INSURANCE. Schedule 3.17 of the Disclosure Letter sets forth
all primary, excess and umbrella policies of general liability, fire, workers'
compensation, products liability, completed operations, employers' liability,
bonds and other forms of insurance providing insurance coverage to the Company
and its Subsidiaries including the name of insurer, limits of liability, per
occurrence and annual aggregate, if any, or combined single limit as applicable.
To the Company's Knowledge, all current policies set forth on Schedule 3.17 of
the Disclosure Letter are in full force and effect, and all premiums currently
payable or previously due and payable have been paid and no notice of
cancellation or termination has been received with respect to any such policy.
None of such policies contain a provision that would permit the termination,
limitation, lapse, exclusion, or change in the terms of coverage (including,
without limitation, a change in the limits of liability) by reason of the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Schedule 3.17 of the Disclosure Letter, neither the Company nor any of
its Subsidiaries has received written notice from any insurance carrier
regarding defects or inadequacies in any Company Property, which, if not
corrected, would result in termination of the insurance coverage therefor or an
increase in the cost thereof.
Section 3.18. NO BROKERS. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Buyer to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the
29
transactions contemplated hereby. The Company is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. The Company and its
Subsidiaries hereby indemnify and hold Buyer harmless from and against all loss,
liability or expense (including, without limitation, reasonable attorneys fees
and disbursements) arising out of any claim or claims by any broker, finder or
similar agent for commissions, fees or other compensation in connection with
this transaction as a result of any breach of this Section 3.18.
Section 3.19. PROXY STATEMENT AND OTHER INFORMATION. The Proxy Statement
and all of the information included or incorporated by reference therein (other
than any information supplied or to be supplied by Buyer for inclusion or
incorporation by reference therein) and any other documents to be filed by the
Company with the SEC or any other Governmental Entity in connection with
Stockholder Approval and the other transactions contemplated by this Agreement
will not, as of the date such Proxy Statement is first mailed to the
stockholders of the Company and as of the time of the meeting of the
stockholders of the Company in connection with the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement and such other documents filed with the SEC
under the Securities Laws will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder.
Section 3.20. VOTE REQUIRED. The affirmative vote of the holders of a 66
2/3% of the outstanding shares of Merger Sub capital stock is required to
approve the Merger. A majority of the votes cast at the Company's Stockholder
Meeting by the holders of the outstanding Company Common Shares and Company
Series A Preferred Shares, voting together as a single class, is required to
approve (i) the issuance of Company Common Shares in connection with the Merger
Agreement and (ii) the transactions contemplated by this Agreement, other than
the Amended Articles of Incorporation. A majority of the outstanding votes
entitled to be cast by the holders of the outstanding Company Common Shares and
Company Series A Preferred Shares, voting together as a single class, is
required to approve the Amended Articles of Incorporation. No other vote of the
holders of any class or series of the Company securities is necessary to approve
the Transaction Documents and the transactions contemplated hereby and thereby.
Section 3.21. OPINION OF FINANCIAL ADVISOR. The Company has received the
written opinion of American Appraisal Associates, to the effect that the
transactions contemplated by the Merger Agreement are fair to the Company from a
financial point of view. The Company has been authorized by such firm to permit
inclusion of such opinion, required descriptions thereof and its analysis in the
Proxy Statement.
Section 3.22. RELATED PARTY TRANSACTIONS. Schedule 3.22 of the
Disclosure Letter sets forth a list of all arrangements, agreements and
contracts entered into by the Company or any of its Subsidiaries with any
person who is an officer, director or Affiliate of the Company or any of its
Subsidiaries, any relative of any of the foregoing or any entity of which any
of the foregoing is an Affiliate since December 31, 1998. The copies of such
documents, all of which have previously been made available to Buyer, are
true and correct. Except as set forth in Schedule
30
3.22 of the Disclosure Letter, no Affiliate of the Company (a) has any interest
of any kind in any Company Property or (b) directly or indirectly owns any
property which is adjacent to or in proximity with any Company Property. Except
as set forth in Schedule 3.22 of the Disclosure Letter or as otherwise
contemplated hereby or by the Voting Stockholders Agreement, to the Knowledge of
the Company, there exist no agreements among stockholders of the Company to act
in concert with respect to their voting or holding of Company securities.
Section 3.23. CONTRACTS AND COMMITMENTS.
(a) Schedule 3.23 of the Disclosure Letter sets forth all notes,
debentures, bonds and other evidence of indebtedness and all guaranties of
indebtedness of the Company and the Company Subsidiaries and identifies
those which are secured or collateralized by mortgages, deeds of trust or
other security interests in the Company Properties or personal property of
the Company and its Subsidiaries. None of the Company or any Company
Subsidiary has received any written notice of a default that has not been
cured under any of the documents described in Schedule 3.23 of the
Disclosure Letter or is in material default respecting any obligations
thereunder beyond any applicable grace periods, and to the Knowledge of the
Company, no event has occurred with respect to any party thereto which,
with notice or the lapse of time, or both, would give rise to a material
event of default. All options of the Company or any of its Subsidiaries to
purchase real property are in full force and effect. Neither the Company
nor any Company Subsidiary is in default with respect to any obligations,
which individually or in the aggregate are material with respect to any
joint venture agreement to which the Company or any Company Subsidiary is a
party.
(b) Except as disclosed in Schedule 3.23 of the Disclosure Letter, as
of the date hereof, there are no outstanding contractual obligations of the
Company or any Company Subsidiary to provide funds to, or to make any
investment (in the form of a loan, capital contribution or otherwise) in
any person.
Section 3.24. MARYLAND TAKEOVER LAW. The terms of Sections 3-601 to 3-605
and 3-701 to 3-709 of the Maryland General Corporation Law will not apply to
Buyer or any transaction contemplated hereby. The resolutions in the form of
EXHIBIT E hereto have been adopted by the Company and have not been rescinded or
revoked.
Section 3.25. INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries own all right, title and interest
in and to, or have a valid and enforceable license to use, all the
Intellectual Property used by them in connection with their respective
businesses, which represents all intellectual property rights necessary to
the conduct of such businesses as currently conducted. The Company and its
Subsidiaries are in compliance in all material respects with all
contractual obligations relating to the protection of such Intellectual
Property. To the Knowledge of the Company, there are no conflicts with or
infringements of any Intellectual Property by any third party. The conduct
of the business of the Company or any of its Subsidiaries as currently
conducted does not, to the Knowledge of the Company, conflict with or
infringe any proprietary right of any third party. There is no claim, suit,
action or proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries that (i) alleges
any such conflict or
31
infringement with any third party's proprietary rights or (ii) challenges
the Company's or any of its Subsidiaries' ownership or use of, or the
validity or enforceability of any Intellectual Property.
(b) Schedule 3.25 of the Disclosure Letter sets forth a complete and
current list of registrations/patents and applications therefor pertaining
to the Intellectual Property ("Listed Intellectual Property") and the owner
of record, date of application or issuance and relevant jurisdiction as to
each. All Listed Intellectual Property is owned by the Company or its
Subsidiaries, free and clear of Encumbrances or claims of any nature other
than Permitted Encumbrances. All Listed Intellectual Property is valid,
subsisting, unexpired, in proper form and enforceable and all renewal fees
and other maintenance fees that have fallen due on or prior to the
effective date of this Agreement have been paid. No Listed Intellectual
Property is the subject of any legal or governmental proceeding before any
Governmental Entity in any jurisdiction, including any office action or
other form of preliminary or final refusal of registration.
(c) Schedule 3.25 of the Disclosure Letter sets forth a complete list
of all (i) licenses, sublicenses and other agreements in which the Company
or any of its Subsidiaries or any sublicensee of the Company or any of its
Subsidiaries has granted to any person the right to use any Intellectual
Property and (ii) all other consents, indemnifications, forbearances to
xxx, settlement agreements and licensing or cross-licensing arrangements to
which the Company or any of its Subsidiaries is a party relating to the
Intellectual Property or the proprietary rights of any third party. Neither
the Company nor any of its Subsidiaries is under any obligation to pay
royalties or other payments in connection with any license, sublicense or
other agreement or restricted from assigning their rights respecting any
Intellectual Property, nor will the Company or any of its Subsidiaries be,
as a result of the execution and delivery of this Agreement or the
performance of the Company's obligations under this Agreement, in material
breach of any license, sublicense or other agreement relating to the
Intellectual Property.
(d) No former or present employee, officer or director of the Company
or any of its Subsidiaries, or agent or outside contractor of the Company
or any of its Subsidiaries, holds any right, title or interest, directly or
indirectly, in whole or in part, in or to any Intellectual Property.
(e) To the Knowledge of the Company, none of the Intellectual Property
has been used, disclosed or appropriated to the detriment of the Company or
any of its Subsidiaries for the benefit of any person other than the
Company or any of its Subsidiaries, and no employee, independent contractor
or agent of the Company or any of its Subsidiaries has misappropriated any
trade secrets or other confidential information of any other person in the
course of the performance of his or her duties as an employee, independent
contractor or agent of the Company or any Subsidiary.
(f) To the Knowledge of the Company, neither the Company's nor any
Subsidiary's transmission, reproduction, use, display or modification
(including framing and linking Web site content) of any of its Intellectual
Property infringes or violates any proprietary or other right of any other
person and, to the Knowledge of the Company, no claim relating to such
infringement or violation is threatened or pending.
32
(g) The Company and all its Subsidiaries own or have the right to use,
disclose and transfer, without the consent of any other person, all
computer software, software systems and databases and all other information
systems used in their respective businesses.
Section 3.26. INVESTMENT COMPANY. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Section 3.27. FULL DISCLOSURE. The Company has not knowingly failed
to disclose to Buyer any facts material to the Company's business, results of
operations, assets, liabilities, financial condition or prospects. No
representation or warranty by the Company in this Agreement and no statement
by the Company in any document referred to herein (including the Schedules
and Exhibits hereto), contains any untrue statement of a material fact or
omits to state any material fact necessary, in order to make the statement
made herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Each Warburg Entity hereby represents and warrants jointly and severally to
the Company as follows:
Section 4.1. ORGANIZATION. It is a limited partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. It has all requisite partnership power and authority to own,
operate, lease and encumber its properties and to carry on its business as now
conducted, and to enter into the Transaction Documents and to perform its
obligations hereunder and thereunder.
Section 4.2. DUE AUTHORIZATION. The execution, delivery and performance of
the Transaction Documents have been duly and validly authorized by all necessary
partnership action on its part. This Agreement and the Voting Stockholders
Agreement have been duly executed and delivered by it and, upon the Closing, the
Registration Rights Agreement shall be duly executed and delivered by it and,
upon execution and delivery by the Company, constitute the valid and legally
binding obligations of it, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
or general principles of equity.
Section 4.3. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the
execution and delivery of this Agreement nor the consummation by it of the
transactions contemplated hereby in accordance with the terms hereof will (a)
conflict with, violate or result in a breach of (i) any provision of its
partnership agreement or its Certificate of Limited Partnership any statute,
law, rule, ordinance, regulation, judgment, order, writ, decree, permit or
injunction or (ii) of any Governmental Entity applicable to such Warburg Entity,
or (b) require any consent, approval or other action by or any notice to or
filing with any Governmental Entity pursuant to, its organizational documents or
any instrument, order, judgment, decree, statute, law, rule or regulation of any
Governmental Entity by which Buyer is bound, except for filings after any
Closing under Section 13(d) or Section 16 of the Exchange Act.
33
Section 4.4. ACQUISITION FOR INVESTMENT; SOPHISTICATION.
(a) It is acquiring the Securities for its own account for the purpose
of investment and not with a view to or for sale in connection with any
distribution thereof, and it has no present intention or plan to effect any
distribution of the Securities; provided that the disposition of the
Company Series B Preferred Shares and the Company Common Shares purchased
pursuant to the Warrants owned by it shall at all times be and remain
within its control, subject to the provisions of this Agreement and the
Registration Rights Agreement; and provided further that it shall have the
right at all times to sell or otherwise dispose of all or any part of such
securities under a registration under the Securities Act (subject to the
terms of the Registration Rights Agreement) or under an exemption from said
registration available under the Securities Act. The certificate(s)
representing the Securities shall bear a prominent legend with respect to
the restrictions on transfer under the Securities Act and under applicable
state securities laws and the restrictions set forth in the Charter
Documents with respect to REIT ownership restrictions. Prior to any
proposed transfer of the Securities, unless such transfer is made pursuant
to an effective registration statement under the Securities Act, Buyer will
deliver to the Company an opinion of counsel to the effect that the
Securities may be sold or otherwise transferred without registration under
the Securities Act. The Company will remove the legend relating to
Securities Act restrictions from any Securities if Buyer delivers to the
Company an opinion of counsel, reasonably satisfactory in form and
substance to the Company, to the effect that such Securities are no longer
subject to transfer restrictions under the Securities Act. Upon original
issuance thereof, and until such time as the same shall have been
registered under the Securities Act or sold pursuant to Rule 144
promulgated thereunder (or any similar rule or regulation), each
certificate for the Company Series B Preferred Shares and the Warrant(s)
shall bear a restricted securities legend and the REIT share ownership
legend referred to above. It is able to bear the economic risk of the
acquisition of the Securities pursuant hereto and can afford to sustain a
total loss on such investment, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of the proposed investment.
(b) It is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act.
Section 4.5. REIT QUALIFICATION MATTERS. With respect to each Warburg
Entity, the representations, certificates, warranties and covenants set forth in
Exhibit G hereto are true, correct and complete.
Section 4.6. ACCESS TO INFORMATION. It acknowledges receipt of the Company
Reports and Disclosure Letter and further acknowledges that it has reviewed the
Company Reports and Disclosure Letter and has been afforded (a) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
transactions contemplated hereby and the merits and risks of investing in the
Securities, (b) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment and (c) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to
34
verify the accuracy and completeness of the information contained in the Company
Reports and the Disclosure Letter. Neither such inquiries nor any other
investigation conducted by or on behalf of Buyer or its representatives or
counsel shall modify, amend or affect Buyer's right to rely on the truth,
accuracy and completeness of the Company Reports and the Disclosure Letter and
the Company's representations and warranties contained in this Agreement.
Section 4.7. ACCURACY OF INFORMATION. The information regarding such
Warburg Entity supplied or to be supplied by it for inclusion or incorporation
by reference into the Proxy Statement will not, as of the date such Proxy
Statement is first mailed to the stockholders of the Company and as of the
meeting of the stockholders of the Company in connection with the transactions
contemplated hereby, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
ARTICLE V.
COVENANTS RELATING TO CLOSINGS
Section 5.1. TAKING OF NECESSARY ACTION.
(a) Each party hereto agrees to use its commercially reasonable
efforts to take or cause to be taken all action and to do or cause to be
done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
by the Transaction Documents, subject to the terms and conditions hereof
and thereof, including all actions and things necessary to cause all
conditions precedent set forth in Article 7 to be satisfied.
(b) As promptly as practicable after the date hereof, the Company
shall prepare and file with the SEC a preliminary proxy statement, as may
be amended or supplemented (as amended and supplemented the "Proxy
Statement") by which the Company's stockholders will be asked to approve,
among other things, (i) an amendment and restatement to the Articles of
Incorporation (the "Amended Articles of Incorporation"), the form of which
is attached hereto as EXHIBIT F, (ii) issuance of Company Common Shares in
connection with the Merger Agreement and (iii) the transactions
contemplated by this Agreement, including but not limited to the issuance
of Company Series B Preferred Shares pursuant to this Agreement (the
"Voting Proposals"). The Company shall use its reasonable efforts to
respond to any comments of the SEC, and to cause the Proxy Statement to be
mailed to the Company's stockholders at the earliest practicable time. As
promptly as practicable after the date hereof, the Company shall prepare
and file any other filings required of the Company or its Subsidiaries
under the Exchange Act, the Securities Act or any other federal, state or
local laws relating to this Agreement and the transactions contemplated
hereby, and state takeover laws (the "Other Filings"). The Company and
Buyer will notify each other of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Proxy Statement
or any Other Filing or for additional information and will supply each
other with copies of all correspondence between each of them or any of
their respective representatives, on the one hand, and the SEC or its staff
or any other government officials, on the other hand, with respect to the
Proxy Statement or any Other Filing. The Proxy
35
Statement and any Other Filing shall comply in all material respects with
all applicable requirements of law. Buyer shall provide the Company all
information about Buyer required to be included or incorporated by
reference in the Proxy Statement or any Other Filing and shall otherwise
cooperate with the Company in taking the actions described in this
paragraph. Whenever any event occurs which is required to be set forth in
an amendment or supplement to the Proxy Statement or any Other Filing, the
Company or Buyer, as the case may be, shall inform the other party of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement. Subject to Section 5.3 herein, the Proxy Statement
shall include the recommendation of the Board that the stockholders of the
Company vote in favor of and approve the Voting Proposals. The Company
shall use its best efforts to obtain such approval.
(c) The Company shall call a meeting of its stockholders (the "Company
Stockholders Meeting") to be held as promptly as practicable after the date
hereof, for the purpose of voting on the Voting Proposals, provided that
should a quorum not be obtained at such meeting of the stockholders, the
meeting of the stockholders shall be postponed or adjourned in order to
permit additional time for soliciting and obtaining additional proxies or
votes. At such meeting, the Company shall use its best efforts to solicit
from holders of Company Common Shares and Company Series A Preferred Shares
proxies in favor of the Voting Proposals. The Company agrees that it shall
vote, or cause to be voted, in favor of the Voting Proposals all Company
Common Shares and Company Series A Preferred Shares directly or indirectly
owned by it.
Section 5.2. PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law and any stock exchange or similar rules and the
confidentiality provisions contained in this Section 5.9, the Company and Buyer
will cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to the
Transaction Documents and any of the transactions contemplated hereby or
thereby. If a party is required by law or any stock exchange or similar rule to
issue a news release or other public announcement, it shall advise the other
party in advance thereof and use reasonable efforts to cause a mutually
agreeable release or announcement to be issued.
Section 5.3. NO SOLICITATION OF TRANSACTIONS.
(a) Unless and until this Agreement is terminated in accordance with
its terms, neither the Company nor its Subsidiaries shall, directly or
indirectly, through any officer, director, agent or otherwise, initiate,
solicit or knowingly encourage (including by way of furnishing non-public
information or assistance), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize
or knowingly permit any of the officers, directors or employees of such
party or any of its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by such
party or any of such party's Subsidiaries to take any such action, and the
Company immediately shall notify Buyer orally (within 24 hours) and in
writing (within 48 hours) of all of the relevant details relating to all
inquiries and proposals which any officer or director of the
36
Company may receive relating to any of such matters including, without
limitation, the identity of the person making such inquiry or proposal and
all accompanying information and if such inquiry or proposal is in writing,
the Company shall deliver to Buyer a copy of such inquiry or proposal;
PROVIDED HOWEVER, that nothing contained in this Section 5.3 or any other
provision hereof shall prohibit the Company or the Board of Directors from
taking and disclosing to the Company's stockholders a position with respect
to a tender or exchange offer by a third party pursuant to Rules 14d-9 and
14e-2 promulgated under the Exchange Act. The Company shall promptly
provide to Buyer any non-public information regarding the Company provided
to any other party which was not previously provided to Buyer.
(b) Notwithstanding the foregoing, prior to the termination of this
Agreement, the Company may furnish information concerning its business,
properties or assets to any Person pursuant to appropriate confidentiality
agreements, and may negotiate and participate in discussions and
negotiations with such Person concerning a Competing Transaction (PROVIDED
that the Company shall not agree to any exclusive right to negotiate with
the Company) if (x) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the Company relating to any such
transaction that provides for consideration which the Board determines in
good faith, after receiving an opinion from a nationally recognized
investment banking firm, is more favorable to the Company and its
stockholders than the terms of this Agreement (taking into account all
relevant factors) and which is not conditioned upon obtaining additional
financing not fully committed at such time, and (y) in the opinion of the
Board, after receiving advice from outside legal counsel to the Company,
the failure to provide such information or access or to engage in such
discussions or negotiations could reasonably cause the Board of Directors
to breach its duties to the Company's stockholders under applicable law (a
Competing Transaction which satisfies clauses (x) and (y) being referred to
herein as a "Superior Proposal"). The Company shall promptly provide to
Buyer any nonpublic information regarding the Company provided to any other
party which was not previously provided to Buyer. If the Company, after
consultation with outside legal counsel, believes that a breach of its
duties to the Company's stockholders could reasonably occur, the Board may
(subject to this and the following sentences) inform the Company's
stockholders that it no longer believes that consummating the transaction
contemplated by this Agreement is in the best interests of the Company's
stockholders and no longer recommends approval (a "Subsequent
Determination"), but only at a time that is after the fifth business day
following Buyer's receipt of written notice advising that the Board of
Directors has received a Superior Proposal specifying the material terms
and conditions of such Superior Proposal (and including a copy thereof with
all accompanying documentation), identifying the Person making such
Superior Proposal and stating that it intends to make a Subsequent
Determination. Notwithstanding anything herein to the contrary, prior to
and including such fifth day the Company may make such public disclosure
that is in its good faith view, after consultation with outside legal
counsel, required under the Federal securities laws. After providing such
notice, the Company shall provide a reasonable opportunity to Buyer to make
such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with its existing recommendation to its
stockholders without a Subsequent Determination. At any time after five
business days following notification to Buyer of the Company's intent to do
so and if the Company has otherwise complied with the terms of this Section
5.3(b), the Board of Directors may terminate this Agreement pursuant to
Section 9.1(g) and enter into an agreement with respect to a Superior
Proposal; PROVIDED that the
37
Company shall, concurrently with entering into such agreement, pay or cause
to be paid to Buyer the Termination Fee (as defined in Section 9.2(b)
hereof). Notwithstanding any other provision of this Agreement, unless the
Agreement is previously terminated, the Company shall submit this Agreement
to its stockholders, whether or not the Board makes a Subsequent
Determination or otherwise withdraws, modifies or fails to make or refrains
from making its existing recommendation.
(c) Except as set forth in Section 5.3(b), neither the Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Buyer, the approval or recommendation by the
Board or any such committee the transaction contemplated by this Agreement,
(ii) approve or recommend, or propose to approve or recommend, any
Competing Transaction or (iii) enter into any agreement with respect to any
Competing Transaction.
Section 5.4. NOTICE OF BREACHES. Each party will notify the other of any
event, transaction or circumstance, as soon as practical after it becomes known
to such party, that causes or will cause any covenant or agreement of such party
under this Agreement to be breached or that renders or will render untrue any
representation or warranty of such party contained in this Agreement. Each party
also will notify the other in writing of any violation or breach, as soon as
practical after it becomes known to such party, of any covenant or agreement
made by such party. No notice given pursuant to this paragraph shall have any
effect on the covenants or agreements contained in this Agreement for purposes
of determining satisfaction of any condition contained herein.
Section 5.5. ACCESS TO INFORMATION. The Company shall, and shall cause each
of its Subsidiaries to, throughout the period from the date hereof until the
Closing has been made, (i) provide Buyer and its Representatives with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents and accountants of the Company and its Subsidiaries
and their respective assets, properties and material books and records, but only
to the extent that such access does not unreasonably interfere with the business
and operations of the Company and its Subsidiaries, and (ii) furnish promptly to
such persons (x) a copy of each report, statement, schedule and other document
filed or received by the Company or any of its Subsidiaries pursuant to the
requirements of federal or state securities laws and each material report,
statement, schedule and other document filed with any other Governmental Entity
and (y) all other information and data (including, without limitation, copies of
Contracts, Plans and other material books and records and environmental
assessments, investigations or studies concerning the properties of such party
or the business or operations conducted thereon) concerning the business and
operations of the Company and its Subsidiaries as the other party or any of such
other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained in
this Agreement or any condition to the obligations of the parties hereto.
Section 5.6. REGULATORY AND OTHER APPROVALS. Subject to the terms and
conditions of this Agreement and without limiting the provisions of Section
5.1(c), each party will proceed diligently and in good faith to, as promptly as
practicable, (a) obtain all consents, approvals or actions of, make all filings
with and give all notices to Governmental Entities or any other public or
private third parties required to consummate the issuance of the Company Series
B Preferred
38
Shares and the other matters contemplated hereby and (b) provide such other
information and communications to such Governmental Entities or other public or
private third parties as the other party or such Governmental Entities or other
public or private third parties may reasonably request in connection therewith.
Section 5.7. CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO CLOSING. During
the period from the date of this Agreement until the earlier to occur of the
Closing or the termination of this Agreement, each of the Company and its
Subsidiaries shall use all commercially reasonable efforts to preserve intact in
all material respects their present business organizations, goodwill reputation,
to keep available the services of their key officers and employees, to maintain
their assets and properties in good working order and condition, ordinary wear
and tear excepted, to maintain insurance on their tangible assets and businesses
in such amounts and against such risks and losses as are currently in effect, to
preserve their relationships with ground lessors, tenants and other occupiers of
properties, customers, suppliers, lenders, joint venture partners and others
having significant business dealings with them and to comply in all material
respects with all laws and orders of all Governmental Entities applicable to
them, and the Company shall not, nor permit any Company Subsidiary, except as
otherwise expressly provided for in this Agreement, or as set forth in Schedule
5.7 of the Disclosure Letter, or as consented to in writing by Buyer, which
consent shall not be unreasonably withheld, or as contemplated by the Merger,
the Exchange Offer, the Tender Offer or the Contemplated Transactions, as
applicable:
(a) incorporate or organize any new Subsidiary of such party, unless
such Subsidiary shall be wholly owned, directly or indirectly, by such
party and the Buyer shall receive prompt notice of such incorporation or
organization, including the information that would have been disclosed
pursuant to Article III hereof had such Subsidiary been in existence on the
date hereof;
(b) amend or propose to amend the Company's Articles of Incorporation
or Bylaws or any of the Company Subsidiaries' Charter Documents or permit
the amendment of the Company's Articles of Incorporation or Bylaws or of
any Charter Documents of the Company Subsidiaries;
(c) declare, set aside or pay any dividend other than in the ordinary
course of business consistent with past practice or make any other
distribution or payment with respect to any shares of its capital stock,
directly or indirectly redeem, purchase or otherwise acquire any shares of
its capital stock or capital stock of any of its Subsidiaries, or make any
commitment for any such action;
(d) issue, deliver, sell or otherwise transfer or authorize or propose
the issuance, delivery, sale or other transfer of, or permit the Company or
any Company Subsidiary to issue, deliver, sell or otherwise transfer, or
authorize or propose the issuance, delivery, sale or other transfer of, any
shares of capital stock of, or beneficial or other equity interests in,
such party or any of its Subsidiaries or Affiliates or any option with
respect thereto;
(e) except, with respect to loans or capital contributions to any of
the Company Subsidiaries that exist on the date hereof, to the extent (i)
required under the express terms of the Company's Charter Documents or
Bylaws or any Company Subsidiary's applicable
39
Charter Document or (ii) in the reasonable good faith judgment of the
Company, as applicable, necessary under the circumstances to satisfy the
current cash needs of the Company or its Subsidiaries provide funds to, or
make any investment (in the form of a loan, capital contribution or
otherwise) in (or permit any of such Company Subsidiaries to take any such
action with respect to), any person;
(f) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) or permitting the Company or any Company Subsidiary
to acquire any business or any corporation, partnership, association or
other business organization or division thereof with assets in excess of
$25,000,000 or acquire any material assets (other than with respect to the
Contemplated Transactions) in an amount which exceeds $30,000,000 in the
aggregate;
(g) mortgage or otherwise encumber or subject to any Encumbrance or
sell, lease or otherwise dispose of any of its material properties or
assets (which, in the case of the Company shall be deemed to include,
without limitation, the Company Properties described on Schedule 3.13 of
the Disclosure Letter) or assign or encumber the right to receive income,
dividends, distributions and the like;
(h) make or agree to make any new capital expenditures in excess of
$5,000,000 in the aggregate;
(i) incur (which shall not be deemed to include entering into credit
agreements, lines of credit or similar arrangements until borrowings are
made or committed to be borrowed under such arrangements) any indebtedness
for borrowed money or guarantee any such indebtedness, or permit to take
any such action, other than (i) Project Debt, (ii) to meet the current cash
needs of the Company and its Subsidiaries business in an aggregate amount
not to exceed $25,000,000, to permit the Company to perform its obligations
hereunder or (iii) to effect a redemption of indebtedness permitted by
clause (j);
(j) voluntarily purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled repayment date with
respect to, or waive any right under, or otherwise modify the provisions
of, any indebtedness, or guarantee of indebtedness, for borrowed money, or
permit the Company or any Company Subsidiaries to take any of such actions,
other than the redemption of indebtedness substantially from the proceeds
of new indebtedness, the provisions of which are not materially less
advantageous to the issuer thereof than those of, and the "ALL-IN" cost of
which (determined in accordance with sound financial practice) shall not
exceed that of, the indebtedness so redeemed;
(k) enter into, adopt, amend in any material respect (except as may be
required by applicable law) or terminate any Plan, as the case may be, or
grant any options, awards or other benefits or increase compensation,
except for normal increases in benefits and compensation in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Company and the Company Subsidiaries or amend or modify any employment
agreement with any officer of the Company and, taken as a whole, grant any
options, awards or other benefits or increase the compensation of the
officers of the Company or any Company Subsidiary for whom
40
executive compensation disclosure would be required to be made on a proxy
statement for an annual meeting under Regulation 14A under the Exchange Act
and Item 402 of Regulation S-K promulgated by the SEC (assuming for this
purpose that each of the Company and the Company Subsidiaries are subject
to such disclosure requirements);
(l) enter into any Contract, or amend or modify any existing Contract,
or engage in any new transaction outside the ordinary course of business
consistent with past practice or not on an arm's-length basis, or permit
any of the Company or any Company Subsidiary to take such actions, with any
affiliate of such party other than transactions among the Company and the
Company Subsidiaries;
(m) make any change in the lines of business in which the Company and
its Subsidiaries participate or are engaged;
(n) enter into any Contract, commitment or arrangement to do or engage
in any action the consummation of which would be prohibited by the
foregoing;
(o) make any changes in its accounting methods or policies except as
required by law, the SEC or generally accepted accounting principles;
(p) fail to maintain and cause its Subsidiaries to maintain insurance
in such amounts and against such risks as are customary for companies;
(q) obtain any equity or debt financing (including any private or
public offering of the Company's capital stock);
(r) except following an event of default thereunder, enter into any
voluntary termination of a Lease material to the shopping center to which
such Lease pertains, unless such Lease is promptly replaced by a lease with
equal or greater value (including rent, term and quality of tenant);
(s) enter into any Lease which would impair the Company's ability to
qualify as a REIT;
(t) take any action or fail to take any action, if such action or
failure to act could cause the Company to fail to quality as a REIT;
(u) make any material Tax election or settle or compromise any
material liability for Taxes;
(v) amend or waive any covenant, condition or provision of the Merger
Agreement;
(w) make any loan of money to or investment in, or purchase any equity
interest in, buy any property from or sell any property to, or enter into
any partnership or joint venture with Legacy other than pursuant to
arrangements existing between the Company and Legacy set forth on Schedule
5.7 of the Disclosure Letter that have been disclosed to Buyer on
41
the date hereof nor amend or waive any term, provision or condition in any
Contract with Legacy;
(x) amend or waive any term or provision or condition of the voting
agreements set forth in Schedule 5.7 of the Disclosure Letter in connection
with the Merger; or
(y) amend or waive any term or provision or condition of the Tender
Offer (as defined in the Merger Agreement).
Section 5.8. ENVIRONMENTAL ASSESSMENTS. The Company shall, at the request
of Buyer, engage a qualified independent environmental consultant to undertake
environmental site assessments on which Buyer may rely, (including, without
limitation, sampling of soil, groundwater and air quality) at any Company
Property where prior assessments have identified an environmental condition or
issue which, in Buyer's sole opinion, could lead to potential liability under
Environmental Laws; provided that the costs of such assessments shall be borne
by Buyer. Such assessments shall be undertaken as soon as practicable, and in
any event, in sufficient time to ensure that the results of the assessment will
be available to Buyer ten days prior to Closing. The Company shall provide
copies of all assessments and results to Buyer immediately upon receipt. Buyer
shall approve the environmental consultant and scope of work for any assessment,
prior to initiation of the assessment. Such approval shall not be unreasonably
withheld.
Section 5.9. FULFILLMENT OF CONDITIONS. Subject to the terms and conditions
of this Agreement, each party will take or cause to be taken all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the other's obligations contained in this Agreement
and to consummate and make effective the transactions contemplated by this
Agreement.
Section 5.10. CONFIDENTIALITY. Buyer shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished or made available to it by the Company concerning the Company and its
Subsidiaries' businesses, operations and financial positions and shall not use
such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Closing Date, Buyer shall promptly return or certify the destruction of all
documents and copies thereof, and all work papers containing confidential
information received from the Company.
ARTICLE VI.
CERTAIN ADDITIONAL COVENANTS
Section 6.1. RESALE. Buyer acknowledges and agrees that the Securities that
Buyer will acquire at the Closing will not be registered under the Securities
Act and may only be sold or otherwise disposed of in one or more transactions
registered under the Securities Act and, where applicable, relevant state
securities laws or as to which an exemption from the registration requirements
of the Securities Act and, where applicable, such state securities laws is
available, and Buyer agrees that the certificates representing such Securities
shall bear a legend to that effect and a legend as to their status as restricted
securities.
42
Section 6.2. REIT STATUS. From and after the date hereof and so long as
Buyer owns 10% or more of the outstanding Company Common Shares (on an as
converted basis) unless the Investor Nominees consent to doing otherwise, the
Company will elect to be taxed as a REIT in its federal income tax returns, will
comply in all material respects with all applicable laws, rules and regulations
of the Code relating to a REIT, and will not take any action or fail to take any
action which would reasonably be expected to, alone or in conjunction with any
other factors, result in the loss of its status as a REIT for federal income tax
purposes.
Section 6.3. FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver
to Buyer promptly upon their becoming available, one copy of each Financial
Statement, report, notice or Proxy Statement sent by the Company to its
stockholders generally, of each Financial Statement, report, notice or Proxy
Statement sent by the Company or any of its Subsidiaries to the SEC or any
successor agency, if applicable, of each regular or periodic report and any
registration statement or prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Company or any Subsidiary
with, or received by such person in connection therewith from, any domestic or
foreign securities exchange, the SEC or any successor agency or any foreign
Governmental Entity performing functions similar to the SEC and of any press
release issued by the Company or any Subsidiary, and of any material of any
nature whatsoever prepared by the SEC or any successor agency thereto or any
state blue sky or securities law commission which relates to affects in any way
the Company or any Subsidiary.
Section 6.4. BOARD COMMITTEES; EXPENSES. The Company shall take all action
within its power to cause at least one Investor Nominee to be a member of all
committees of the Board until such time as the Buyer is no longer entitled to
appoint designees to the Board under the Amended Articles of Incorporation. The
Company shall pay the reasonable out-of-pocket expenses of each Investor Nominee
incurred in connection with attending any Board meetings or Board committee
meetings.
Section 6.5. TERMS OF EXCHANGE OFFER. The Company shall not take any action
to change the terms and conditions of the Exchange Offer (as defined in the
Merger Agreement) without the consent of Buyer.
Section 6.6. AGREEMENT TO VOTE SHARES. Each Warburg Entity shall vote all
of its Company Series B Preferred Shares (and all Conversion Shares and other
shares of capital stock of the Company held by such Warburg Entity on the
relevant date), and shall use its reasonable efforts to cause each Investor
Nominee, subject to such Investor Nominee's obligations to the Company and its
stockholders, to vote, in favor of approval of the Exchange Offer (as defined in
the Merger Agreement) and the Preferred Offer (as defined in the Merger
Agreement), and each other transaction necessary or appropriate to consummate
the foregoing transactions, to the extent any such vote is sought by the
Company, at any meeting of the Board or stockholders of the Company called for
such purpose (and any adjournment or postponement thereof) or by written action
without a meeting or otherwise.
Section 6.7. REIT CERTIFICATION. From and after the date hereof, each
Warburg Entity shall not take any action, or fail to take any action, that would
make any of the representations, certifications or warranties set forth in
EXHIBIT G untrue.
43
Section 6.8. ADDITIONAL SHARES. In the event that any of the Company Common
Shares (the "Collateral Shares") owned by Legacy that are held as collateral for
the 9.0% Convertible Redeemable Subordinated Secured Debentures due 2004 or
10.0% Senior Redeemable Secured Notes due 2004 are transferred to any Person or
otherwise become beneficially held by, any Person other than the Company or any
of its direct or indirect wholly-owned subsidiaries, then the Company shall take
all actions necessary to issue to Buyer that number of additional Company Series
B Preferred Shares that would result in the Buyer Ownership Ratio immediately
subsequent to such transfer or beneficial ownership change being equal to the
Buyer Ownership Ratio immediately prior to such transfer; provided, that if the
Closing shall not have occurred prior to any such transfer of Collateral Shares
then the amount of Company Series B Preferred Shares set forth on Exhibit A
shall be proportionately increased such that the Buyer Ownership Ratio
immediately subsequent to Closing would equal the Buyer Ownership Ratio at
Closing assuming that the Collateral Shares so transferred were not outstanding
at Closing. For purposes hereof, the "Buyer Ownership Ratio" shall mean the
quotient obtained by dividing (i) the number of Company Common Shares (assuming
conversion of the Company Series B Preferred Shares) owned by Buyer by (ii) the
number of Company Common Shares outstanding (assuming conversion of the Company
Series B Preferred Shares) less any Collateral Shares.
ARTICLE VII.
CONDITIONS TO CLOSING
Section 7.1. CONDITIONS OF PURCHASE. The obligations of Buyer to purchase
and pay for the Securities at the Closing are subject to satisfaction or waiver
of each of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of the Company contained in this Agreement that are modified by
materiality or the Company Material Adverse Effect shall be true and
correct in all respects, and those that are not so modified shall be true
and correct in all material respects, on the date hereof (provided that the
representations and warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.6 and 3.14
shall be true in all respects) and as of the Closing Date as if made on the
Closing Date (except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be true
and correct as of such date or time)). The covenants and agreements of the
Company to be performed on or before the Closing Date in accordance with
this Agreement shall have been duly performed in all material respects. The
Company shall have delivered to Buyer at the Closing a certificate of an
appropriate officer in the form and substance reasonably satisfactory to
Buyer dated the Closing Date certifying as to the Company's compliance with
this Section 7.1(a).
(b) NO INJUNCTION. There shall not be in effect any final order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby
and there shall be no pending actions which would reasonably be expected to
have a material adverse effect on the ability of the Company to consummate
the transactions contemplated hereby or to issue the Securities.
44
(c) PROCEEDINGS. All corporate and other proceedings to be taken by
the Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer and Buyer shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
(d) REIT STATUS. The Company shall have elected to be taxed as a REIT
in its most recent federal income Tax Return, and shall be in compliance
with all applicable laws, rules and regulations, including the Code,
necessary to permit it to be taxed as a REIT, unless the Investor Nominees
shall have consented to changing such election. The Company shall not have
taken any action or have failed to take any action which would, alone or in
conjunction with any other factors, result in the loss of its status as a
REIT for federal income tax purposes, unless the Investor Nominees shall
have consented to taking or omitting to take such action.
(e) DOMESTICALLY CONTROLLED REIT. The Company is, and after giving
effect to the Closing will be, a "domestically-controlled REIT" within the
meaning of Section 897(h)(4)(B) of the Code.
(f) OPINION OF COUNSEL. On or prior to the date of the Closing, the
Company shall have delivered to Buyer an opinion of Xxxxxx & Xxxxxxx,
counsel for the Company in form and substance reasonably acceptable to
Buyer. The Company shall have also delivered to Buyer the opinion of Xxxxxx
& Xxxxxxx, counsel for the Company, in form and substance reasonably
acceptable to Buyer that the Company qualifies as a real estate investment
trust within the meaning of Section 856 of the Code ("REIT").
(g) RELATED TRANSACTIONS. Each of the Voting Stockholders Agreement
and the Registration Rights Agreement shall have been executed, the
forms of which are attached as Exhibit B and Exhibit C.
(h) NO MATERIAL ADVERSE CHANGE. There shall not have been any
change, event or occurrence which, individually or in the aggregate, has
had or could reasonably be expected to have a Company Material Adverse
Effect.
(i) INVESTOR NOMINEES. Xxxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxx
(the "Investor Nominees") shall have become members of the Board and the
individuals listed on Schedule 7(i) of the Disclosure Letter shall
constitute the remaining members of the Board.
(j) STOCKHOLDER APPROVAL. The Company shall have obtained the
required stockholder approval necessary to approve the Voting Proposals
(collectively, the "Stockholder Approval").
(k) MERGER CONSUMMATED. The Merger shall have been consummated.
(l) NASDAQ LISTING. The Conversion Shares shall have been approved
for listing on Nasdaq or such other national securities exchange as the
Board may determine.
45
(m) AMENDED ARTICLES OF INCORPORATION. The Company shall have
filed an Amended Articles of Incorporation, the form of which is
attached as EXHIBIT F hereto, with the SDAT, and satisfactory evidence
of such filing shall have been delivered to Buyer.
(n) EMPLOYMENT AGREEMENT WAIVERS. The Company shall have obtained
all necessary waivers and consents such that none of the transactions
contemplated either hereunder or pursuant to the Merger Agreement
shall constitute a "Change in Control" for purposes of any agreement
listed on 3.15(k) hereof (as defined in each such agreement).
(o) ADDITIONAL DELIVERIES. All other documents, instruments and
writings required to be delivered prior to the Closing.
(p) TAXABLE REIT SUBSIDIARY. Legislation is enacted in the State
of California on or prior to the Closing conforming California law to
federal law with respect to the treatment of taxable REIT subsidiaries
(as defined in Section 856(l)) of the Code, or Buyer otherwise
determines in its reasonable discretion that the Company's proposed
method of operation will enable the Company to qualify as a real
estate investment trust for California state income tax purposes.
Section 7.2. CONDITIONS OF SALE. The obligation of the Company to issue and
sell the Securities at the Closing is subject to satisfaction or waiver of each
of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of Buyer that are modified by materiality shall be true and
correct in all respects and those that are not so modified shall be true
and correct in all material respects, on the date hereof, and as of the
Closing Date as if made on the Closing Date (except for representations and
warranties that speak as of a specific date or time other than the Closing
Date (which need only be true and correct as of such date or time)). The
covenants and agreements of Buyer to be performed on or before the Closing
Date in accordance with this Agreement shall have been duly performed in
all material respects. Buyer shall have delivered to the Company at the
Closing a certificate of an appropriate officer in form and substance
reasonably satisfactory to the Company dated the Closing Date certifying as
to Buyer's compliance with this Section 7.2(a). Each Warburg Entity shall
have delivered to the Company at the Closing a certificate of an
appropriate officer in the form of Exhibit G hereto.
(b) NO INJUNCTION. There shall not be in effect any final order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby
and there shall be no pending actions which would reasonably be expected to
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby or to acquire the Securities.
(c) PROCEEDINGS. All corporate and other proceedings to be taken by
Buyer in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and the Company shall have received all such
counterpart originals or certified or other copies of such documents as it
may reasonably request.
46
(d) STOCKHOLDER APPROVAL. The Company shall have obtained the required
Stockholder Approval.
(e) MERGER CONSUMMATED. The Merger shall have been consummated.
(f) REIT CERTIFICATE. The Company shall have received an executed REIT
Representation Certificate of Buyer in the form of EXHIBIT G from each
Warburg Entity.
ARTICLE VIII.
SURVIVAL; INDEMNIFICATION
Section 8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of each of the parties to
this Agreement made herein or in any certificate or other instrument delivered
by one of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date), shall be considered to have been relied upon by each of the
other parties to this Agreement, as the case may be, and shall survive the
Closing Date and the consummation of the transactions contemplated by this
Agreement, except that, subject to this Section 8.1, the representations and
warranties set forth in Article III and Article IV shall survive the Closing for
a period terminating on the date eighteen (18) months after the Closing Date
(the "Indemnification Termination Date" and such period, the "Indemnification
Period"); provided that (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.4, 4.1, 4.2, 4.4 and 4.5 shall survive indefinitely
and (ii) the representations and warranties contained in Section 3.14, shall
survive for a period of seven years from the Closing. Notwithstanding the
previous sentence, if any claims for indemnification have been asserted with
respect to any such representations and warranties prior to the Indemnification
Termination Date, the representations and warranties on which any such claims
are based shall continue in effect until final resolution of any claims, and
provided further that representations, warranties and covenants relating to
Taxes shall survive until 30 days after expiration of all applicable statutes of
limitations relating to such Taxes. All covenants to be performed after the
Closing Date shall continue indefinitely.
Section 8.2. INDEMNIFICATION BY THE COMPANY.
Subject to the limitations set forth in this Section 8.2, from and
after the Closing Date, the Company shall protect, defend, indemnify and hold
harmless Buyer and their respective affiliates, officers, directors, employees,
representatives and agents (Buyer and each of the foregoing persons or entities
is hereinafter referred to individually as a "Buyer Indemnified Person" and
collectively as "Buyer Indemnified Persons") from and against any and all
losses, costs, damages, liabilities, fees (including without limitation
reasonable attorneys' fees) and expenses (collectively, the "Damages"), that any
of the Buyer Indemnified Persons incurs by reason of, or in connection with any
claim, demand, action or cause of action alleging, any misrepresentation, breach
of, or default in connection with, any of the representations, warranties,
covenants or agreements of the Company contained in this Agreement, including
any exhibits or schedules attached hereto, of which Buyer notifies the Company
in writing during the Indemnification Period. Damages in each case shall be net
of the amount of any insurance proceeds and indemnity and contribution actually
recovered by Buyer.
47
Section 8.3. INDEMNIFICATION BY BUYER.
Subject to the limitations set forth in this Section 8.3, from and
after the Closing Date, Buyer shall protect, defend, indemnify and hold harmless
the Company and its respective affiliates, officers, directors, employees,
representatives and agents (each of the foregoing persons or entities is
hereinafter referred to individually as a "Company Indemnified Person" and
collectively as "Company Indemnified Persons") from and against any and all
Damages that any of the Company Indemnified Persons incurs by reason of or in
connection with any claim, demand, action or cause of action alleging,
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of Buyer contained in this
Agreement, including any exhibits or schedules attached hereto, of which the
Company notifies Buyer in writing during the Indemnification Period. Damages in
each case shall be net of the amount of any insurance proceeds and indemnity and
contribution actually recovered by the Company Indemnified Person.
Section 8.4. DAMAGES THRESHOLD.
(a) Notwithstanding the foregoing, Buyer may not receive any
indemnification under this Article 8 unless and until Damages in the
aggregate amount are in excess of $2,000,000 and such amount is determined
pursuant to this Article 8 to be payable; provided that this sentence shall
not apply to Damages resulting from any breach of the representations and
warranties contained in Sections 3.3 (Capitalization) and 3.16 (No
Brokers), and the Company shall then only be liable for Damages in excess
of such amount. The maximum aggregate liability of the Company pursuant to
its indemnification obligations under this Article 8 shall be $100,000,000.
(b) Notwithstanding the foregoing, the Company may not receive any
indemnification under this Article 8 unless and until Damages in the
aggregate amount are in excess of $2,000,000 and such amount is determined
pursuant to this Article 8 to be payable, any Buyer shall then only be
liable for Damages in excess of such amount. The maximum aggregate
liability of Buyer pursuant to its indemnification obligations under this
Article 8 shall be $100,000,000.
Section 8.5. THIRD-PARTY CLAIMS.
(a) If any third party shall notify any party (the "Third-Party
Indemnified Party") with respect to any matter (a "Third-Party Claim")
which may give rise to a claim for indemnification against any other party
(the "Third-Party Indemnifying Party") under this Article 8, then the
Third-Party Indemnified Party shall promptly (and in any event within ten
(10) business days after receiving notice of the Third-Party Claim) notify
the Third-Party Indemnifying Party thereof in writing; provided, however,
that failure to provide such notice on a timely basis shall not release the
Third-Party Indemnifying Party from any of its obligations under this
Article 8 except to the extent the Third-Party Indemnifying Party is
materially prejudiced by such failure.
(b) The Third-Party Indemnifying Party shall, upon receipt of such
notice and upon its notifying the Third-
48
Party Indemnified Party in writing that it shall indemnify all Third-Party
Indemnified Parties in respect of such matter, be entitled to participate
in or, at the Third-Party Indemnifying Party's option, assume at its own
expense the defense, appeal or settlement of such Third-Party Claim with
respect to which such indemnity has been invoked with counsel of its own
choosing (who shall be reasonably satisfactory to the Third-Party
Indemnified Party, PROVIDED, HOWEVER, that Xxxxxxx Xxxx & Xxxxxxxxx, Xxxxxx
& Xxxxxxx and Xxxxxx Xxxxxx & Xxxxx LLP are hereby deemed satisfactory to
the Third-Party Indemnified Party), and the Third-Party Indemnified Party
shall fully cooperate at the expense of the Third-Party Indemnifying Party
with the Third-Party Indemnifying Party in connection therewith including
contesting such Third-Party Claim or making any counterclaim against the
person asserting such Third-Party Claim; provided, however, that if the
Third-Party Indemnifying Party assumes the defense, appeal or settlement of
such Third-Party Claim, the Third-Party Indemnified Party shall be entitled
to employ one counsel to represent itself if an actual conflict of interest
exists in the opinion of counsel to the Third-Party Indemnified Party
between the Third-Party Indemnifying Party and the Third-Party Indemnified
Party in respect of such Third-Party Claim and in that event the reasonable
fees and expenses of one such counsel shall be paid by the Third-Party
Indemnifying Party; and provided, further, that any Third-Party Indemnified
Party is hereby authorized prior to the date on which it receives written
notice from the Third-Party Indemnifying Party that it intends to assume
the defense, appeal or settlement of such Third-Party Claim, to file any
motion, answer or other pleading and take such other action which it shall
reasonably deem necessary to protect its interest or that of the
Third-Party Indemnifying Party until the date on which the Third-Party
Indemnified Party receives such notice from the Third-Party Indemnifying
Party. In the event that the Third-Party Indemnifying Party fails to assume
the defense, appeal or settlement of such Third-Party Claim within twenty
(20) days after receipt of notice thereof from the Third-Party Indemnified
Party, such Third-Party Indemnified Party shall have the right to undertake
the defense or appeal of or settle or compromise such Third-Party Claim on
behalf of and for the account and risk of the Third-Party Indemnifying
Party.
(c) Except as set forth in the last sentence of Section 8.5(b) above,
no claim or demand may be settled without the consent of the Third-Party
Indemnifying Party, which consent shall not be unreasonably delayed or
withheld. Unless the claim or demand seeks only dollar damages (all of
which are to be paid by the Third-Party Indemnifying Party), no such claim
or demand may be settled by the Third-Party Indemnifying Party without the
consent of the Third-Party Indemnified Party, which consent shall not be
unreasonably delayed or withheld.
Section 8.6. REIT INDEMNIFICATION. Notwithstanding anything in this
Agreement to the contrary, the Company shall have the remedies set forth in
Exhibit G in addition to those set forth in this Article VIII in the event of a
breach of the representations, certifications, warranties and/or covenants set
forth in Exhibit G.
ARTICLE IX.
TERMINATION
Section 9.1. TERMINATION. This Agreement may be terminated at any time by:
(a) the mutual consent of Buyer and the Company;
49
(b) either the Company or Buyer, in the event that Stockholder
Approval shall not have been obtained at a duly held meeting of
stockholders or at any adjournment thereof;
(c) either the Company or Buyer, if the Board shall have withdrawn,
modified or failed to make or refrained from making its recommendation that
the stockholders of the Company approve the (i) Voting Proposals or (ii)
any other item described in the Proxy Statement;
(d) either the Company or Buyer, if there has been a material breach
of any representation, warranty, covenant or agreement on the part of the
nonterminating party set forth in this Agreement, which breach is not
curable or, if curable, has not been cured within twenty (20) days
following receipt by the nonterminating party of notice of such breach from
the terminating party;
(e) either the Company or Buyer, if any court of competent
jurisdiction or other competent Governmental Entity shall have issued an
order making illegal or otherwise restricting, preventing or prohibiting
the consummation of this Agreement or any of the transactions contemplated
hereby and such order shall have become final and nonappealable;
(f) either the Company or Buyer, in the event the transactions
contemplated by the Merger Agreement are not consummated by November 21,
2001.
(g) the Company to allow the Company to enter into an agreement in
accordance with Section 5.3(b) with respect to a Superior Proposal which
the Board has determined is more favorable to the stockholders of the
Company than the transactions contemplated hereby; PROVIDED that it has
complied with all provisions thereof, including the notice provision
therein, and that it makes simultaneous payment of the Termination Fee.
Section 9.2. PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or both of
the Company and Buyer pursuant to Section 9.1 hereof, written notice
thereof shall forthwith be given by the terminating party to the other
party hereto, and this Agreement shall thereupon terminate and become void
and have no effect, and the transactions contemplated hereby shall be
abandoned without further action by the parties hereto, except that the
provisions of Sections 5.2 (Public Announcements), 5.9 (Confidentiality),
9.3 (Expenses and Taxes), 10.2 (Governing Law), and 10.4 (Notices), and any
related definitional, interpretive or other provisions necessary for the
logical interpretation of such provisions, shall survive the termination of
this Agreement; provided, however, that such termination shall not relieve
any party hereto of any liability for any breach of this Agreement.
(b) In the event that (i) this Agreement is terminated pursuant to
Section 9.1(b) or Section 9.1(f), or (ii) Buyer terminates this Agreement
due to a breach by the Company of any representation, warranty, covenant or
agreement pursuant to Section 9.1(d) as applicable to the Company, then
Buyer shall become entitled to receive from the Company a termination fee
of $1,000,000 (taking into account all legal and other costs and expenses
incurred in connection with this Agreement) and in the event this Agreement
is terminated by Buyer
50
pursuant to Section 9.1(c) or by the Company pursuant to Section 9.1(g),
then in any such case the Company shall pay simultaneously with such
termination if pursuant to Section 9.1(g) and promptly, but in no event
later than two business days after the date of such termination or event if
pursuant to Section 9.1(c) a termination fee of $4,000,000 (taking into
account all legal and other costs and expenses incurred in connection with
this Agreement) (collectively, the "Termination Fee").
(c) If Buyer shall have terminated this Agreement pursuant to Section
9.1(b) or Section 9.1(d) or Section 9.1(f) and within one year of any such
termination (i) the Company shall have entered into a definitive agreement
with respect to a Competing Transaction or a Competing Transaction with
respect to the Company shall have been consummated or (ii) Legacy shall
have entered into a definitive agreement with respect to a Legacy Competing
Transaction or a Legacy Competing Transaction with respect to Legacy shall
have been consummated, then in any such case the Company shall pay
promptly, but in no event later than two business days after the date of
such event to Buyer an additional termination fee of $3,000,000, which
amount shall be payable by wire transfer to an account specified by Buyer.
(d) The parties acknowledge that the agreements contained in the
preceding paragraph are an integral part of the transactions contemplated
by this Agreement and that without these agreements, Buyer would not enter
into this Agreement; accordingly, if the Company fails promptly to pay the
amounts due in accordance with the terms of such paragraph, and in order to
obtain any such payment, Buyer commences a suit which results in a judgment
against the Company for any such payment, the Company shall pay to Buyer
its cost and expenses (including reasonable attorneys' fees and expenses)
in connection with such suit.
Section 9.3. EXPENSES AND TAXES.
(a) The Company agrees to pay at the Closing the reasonable fees and
expenses of Buyer, of up to $500,000, incurred in connection with the
investigation and diligence of the Company and incurred in connection with
the negotiation, preparation, execution and delivery of this Agreement.
(b) The Company will pay, and save and hold Buyer harmless from any
and all liabilities (including interest and penalties) with respect to, or
resulting from any delay or failure in paying, stamp and other taxes (other
than income taxes) or recording fees, if any, which may be payable or
determined to be payable on the execution and delivery or acquisition of
the Securities or the Conversion Shares.
(c) Except as set forth in this Agreement, whether or not the purchase
of the Securities is consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
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ARTICLE X.
MISCELLANEOUS
Section 10.1. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section 10.1,
provided receipt of copies of such counterparts is confirmed.
Section 10.2. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 10.3. ENTIRE AGREEMENT. This Agreement, the Warrant, the
Registration Rights Agreement, and the Voting Stockholders Agreement and the
Schedules and Exhibits hereto contain the entire agreement and supersede any and
all other prior agreements and undertakings, both written and oral, between the
parties with respect to the subject matter hereof. There are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein. This Agreement is not intended to confer
upon any person not a party hereto (and their successors and assigns) any rights
or remedies hereunder.
Section 10.4. NOTICES. All notices and other communications hereunder shall
be sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
shall be addressed to:
Price Enterprises, Inc.
00000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx and S. Xxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
00000 Xxxx Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
52
Warburg, Xxxxxx Equity Partners, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Section 10.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors.
This Agreement shall not be assigned by operation of law or otherwise, except
that Buyer may assign all or any of its rights hereunder to any Affiliate of
Buyer in which Warburg, Xxxxxx & Co. is the general partner.
Section 10.6. HEADINGS. The Section, Article and other headings contained
in this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 10.7. AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by each of the
parties hereto. Either party hereto may, in its sole discretion and only by an
instrument in writing, waive compliance by the other party hereto with any term
or provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent breach.
Section 10.8. INTERPRETATION; ABSENCE OF PRESUMPTION.
(a) For the purposes hereof, (i) words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held
to include the other gender as the context requires, (ii) the terms
"hereof", "herein", and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph,
Exhibit and Schedule references are to the Articles, Sections, paragraphs,
Exhibits and Schedules to this Agreement unless otherwise specified, (iii)
the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall
not be exclusive and (v) provisions shall apply, when appropriate, to
successive events and transactions.
53
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
Section 10.9. SEVERABILITY. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 10.10. FURTHER ASSURANCES. The Company and Buyer agree that, from
time to time, whether before, at or after the Closing Date, each will execute
and deliver such further instruments of conveyance and transfer and take such
other action as may be necessary to carry out the purposes and intents hereof.
Section 10.11. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter in
addition to any other remedy to which they may be entitled, at law or in equity.
[signature page follows]
54
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
PRICE ENTERPRISES, INC.
By: /s/ S. XXXX XXXXXXX
-------------------------------------
Name: S. Xxxx Xxxxxxx
Title: Senior Vice President
WARBURG, XXXXXX EQUITY PARTNERS, L.P.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Partner
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS,
I, C.V.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Partner
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS,
II, C.V.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Partner
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS,
III, C.V.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Partner
EXHIBIT A
BUYER NUMBER OF SHARES PURCHASE PRICE
Warburg, Xxxxxx Equity
Partners, L.P. 16,996,404 $94,500,000
Warburg, Xxxxxx Netherlands
Equity Partners I, C.V. 539,568 $3,000,000
Warburg, Xxxxxx Netherlands
Equity Partners II, C.V. 359,712 $2,000,000
Warburg, Xxxxxx Netherlands
Equity Partners III, C.V. 89,928 $500,000
Total 17,985,612 $100,000,000
56
